Rupee fall against USD: How does this impact us?

 As we look day by day Indian Rupee (INR) is stumbling down against US Dollar (USD). On this Friday INR reached psychological mark of 65 against 1USD. What affect it cause to India, to our pockets in long term and short term. Does it make you richer or poorer with every slump INR gets? I would like to explain all that in this post.

Why Rupee is stumbling down

The one big reason of this fall is The Great China Stock Exchange Crash. Yes! This crash is as great as China’s Great Wall and Great Firewall. Since November 2014 to June 2015 Shanghai stock exchange received unprecedented growth and it rose by more than 50%. A lot of investment was attracted to China, unfortunately most of investment was borrowed money and thus creating the great bubble, which exploded taking investors to a loss of worth 3 trillion USD as Chinese government made a rule against Trading by Margin (which is investing borrowed money). Chinese government stopped bubble from expanding and in result it exploded resulting to loss more than Brazil’s or India’s annual GDP. It is many times than Greece debt. So it makes already slow China’s economy vulnerable get into a recession. So being India’s one of largest importer and exporter it impacted BSE too. So what Chinese thought to solving this mess is to do a currency devaluation (reducing the value of currency to make it more attractive to investments by reducing interest rates). So this may trigger currency wars in Asia as seeing the size of China’s economy loads of countries will be affected in result also driving them to currency devaluation as to stand in competition (Capitalism demands blood sire!).

          Thing to be noted currency devaluation is different from currency depreciation as devaluation is intentional by government whereas depreciation is due to external factors.

Why China faced slow economy growth

          If you plan to go to USA or Europe for a holiday tour and impress your relatives and friends by presenting them imported gifts, please cancel your plans. Your friends may laugh at you seeing MADE IN CHINA stickers. China’s economy is highly export dependent, and 2008 crisis decreased demand in NATO countries hereby triggering slow economic growth in China and Japan too.

          In 2005 our hero Raghuram Rajan have warned about this crisis due to wrong policies of central banks of different countries, but people were laughing at him that time. And when recession hit, he was laughing back.

          Well it was not only 2008 global financial crisis but sanctions against Russia and Greece crisis added more to it.

How does it affect India

                Different people give different theories; you better listen to Raghuram Rajan. As right now he hasn’t said much but soon in September we may expect his words. But right now listen to me. China may get into recession that may make India more attractive investment destination, as cheap labor it offers, some of which adroit in English and not forget highly unemployed. Rupee stumbling down makes USD stronger so better cancel plans to USA, better go to China for holidays. We are getting poorer as compared to USA but richer as compared to China. But they are already quite rich, we are just reducing the gap.

          It is great time for India to switch economic reform and let all money come here to make us prosperous. Our government highly willing to that but consistent foolishness showed by Congress in blocking crucial reform bills such as GST is driving investors desperate thereby a little chaos is seemed to come if these reforms do not come at time. I wonder why people bothered to give them those 44 seats.

          So in a short term this situation is making us poorer internationally, but don’t worry. As I said our hero Raghuram is at work. Hitting inflation hard, making it go to 5% in next spring. And good news is with Saudis not reducing oils supply and Iran also joining the field (as they thought oil production is better option than nuclear bombs), oil prices will fall and fall.  Whom to take benefit, India. So no doubt, India’s recovering economy will soon get stronger (provided that Magic of  Raghu keep working)  and soon high growth will touch India (provided that Rahul baba get some brains and stop obstructing parliament). In a long term, we are getting richer as loads of investments are coming to the land of rivers to build infrastructures and open the basket of jobs and entrepreneurial opportunities.