The Two Tales of Descent
Background/Objectives: To explore the two recent descents of the Indian rupee: (1) the economic slump in August 2013 and (2) the recent slide in rupee in October 2018 by facilitating a comparative analysis between the two.
Methods/Statistical Analysis: This is a review article in which we peruse through various research papers and opinionated articles on rupee depreciation by academicians and policy makers of repute and capture the relative intensities of the two events. Further, we analyse whether the fall emerged from the same set of reasons or were there any digressions and question why the same set of factors continue to harangue the economic harmony of the country.
Findings: We observe that on the pretext of volatile capital outflows and current account imbalances, the two falls have very similar repercussions. However, in terms of their origins and institutional characteristics like policies, political confidence and global economic environment, the two events are widely disparate. While the former was a consequence of global economic slump and overuse of fiscal stimulus, the latter accounted for the consistent rising international oil prices- ‘India’s historic macroeconomic vulnerability’.
Improvements/Applications: Unlike other papers in the literature, we compare the two events to conclude its dissimilarities and reflect the underlying challenges that make the Indian economy vulnerable to such shocks. Therefore, this paper provides a comprehensive view of such volatilities and serves as a reminder that the battle of macro-economic stability is never won and even major victories (reminiscing the economic crisis of post 2011) are always provisional and the process of reforms and vigilance must never stop (Economic Survey, 2018).
Keywords
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