Currency depreciation: UPA vs NDA
Ironically
as the Rupee started to weaken, the politics started to heat up with
politicians restarting their age-old blame game. I have witnessed several
people commenting on the currency depreciation issue and linking it with UPA
and NDA in some way or the other and questioning efficacy of the governments at
those instances. Along with this, the upcoming election campaigns have started
to begin, with depreciating rupee gathering a big space in their agenda to hit
their counterparts. Historical data stands clearly by us to suggest that indeed
rupee did slide both during UPA and NDA regimes. During the former regime, it
slid from somewhere near Rs. 49 to near about Rs. 61, while in the latter’s
regime it slid to Rs. 71 and counting. On one hand the UPA regime had witnessed
global crisis, high crude oil prices with some other shocks, while at the other
the NDA regime has witnessed the recent re-strengthening of oil prices and the
unprecedented level of trade wars.
So firstly it is indeed clear that the macro economic situations are subjected to vary every year and we being an integral part of the global economy will have to suffer its positive or negative consequences too. As a matter of fact, former Finance minister Mr P Chidambaram too stated in his 2013-14 budget speech “We are not unaffected by what happens in the rest of the world and our economy too has slowed after 2010-11”. Although it is true that along with the macro economic conditions, the internal policies also to some extent shake the currency market by altering the foreign inflows and trade deficits, but whether the currency depreciation occurs due the global conditions or inefficient policymaking can only be understood by comparing it with its global peers. So, for this purpose, the currencies of some emerging market economies were compared. “ An emerging market is a country that has some characteristics of a developed market but does not meet standards to be a developed market” according to the MSCI Market Classification Framework. As per March 2014 grouping, India has been kept with the EAGLEs (emerging and growth leading economies), whose incremental GDP in the next 10 years is expected to be larger than the average of G7 economies. Other countries which fall in the same group are Brazil, Mexico, Turkey, China, Indonesia and Russia. This group was considered as our sample to compare the currency depreciation. Depreciation in each country was then calculated for the two periods i.e. 2009-2014 and 2014-2019. In the former’s period, Brazil’s currency depreciated approximately by 0%, China’s by -12.3%, India’s by 28.6%, Indonesia’s by 9.6%, Mexico’s by -5%, Turkey’s by 40% and Russia’s by 12.2%. Here the negative depreciation percentages i.e. in the case of China and Mexico means currency appreciation or strengthening. Moving to the later period, here Brazil’s currency depreciated by 73.9%, China’s by 73.9%, India’s by 12.9%, Indonesia’s by 21.5%, Mexico’s by 45.8%, Turkey’s by 209.5% and Russia’s by 103.9%.
So firstly it is indeed clear that the macro economic situations are subjected to vary every year and we being an integral part of the global economy will have to suffer its positive or negative consequences too. As a matter of fact, former Finance minister Mr P Chidambaram too stated in his 2013-14 budget speech “We are not unaffected by what happens in the rest of the world and our economy too has slowed after 2010-11”. Although it is true that along with the macro economic conditions, the internal policies also to some extent shake the currency market by altering the foreign inflows and trade deficits, but whether the currency depreciation occurs due the global conditions or inefficient policymaking can only be understood by comparing it with its global peers. So, for this purpose, the currencies of some emerging market economies were compared. “ An emerging market is a country that has some characteristics of a developed market but does not meet standards to be a developed market” according to the MSCI Market Classification Framework. As per March 2014 grouping, India has been kept with the EAGLEs (emerging and growth leading economies), whose incremental GDP in the next 10 years is expected to be larger than the average of G7 economies. Other countries which fall in the same group are Brazil, Mexico, Turkey, China, Indonesia and Russia. This group was considered as our sample to compare the currency depreciation. Depreciation in each country was then calculated for the two periods i.e. 2009-2014 and 2014-2019. In the former’s period, Brazil’s currency depreciated approximately by 0%, China’s by -12.3%, India’s by 28.6%, Indonesia’s by 9.6%, Mexico’s by -5%, Turkey’s by 40% and Russia’s by 12.2%. Here the negative depreciation percentages i.e. in the case of China and Mexico means currency appreciation or strengthening. Moving to the later period, here Brazil’s currency depreciated by 73.9%, China’s by 73.9%, India’s by 12.9%, Indonesia’s by 21.5%, Mexico’s by 45.8%, Turkey’s by 209.5% and Russia’s by 103.9%.
So, it is quite evident that the global and internal scenarios stand differently under the NDA regime than what they were under the UPA regime. While at the same time it is also clear that the currency that was the second-worst performing in the group during UPA regime (when even currencies of some economies had strengthened) stands as the best performing currency under the NDA regime when there’s bloodshed in the entire EME’s, which to some extent does speak of the nature of efficiencies of the internal policies and the confidence and the repute that we have built amongst the global investors under the NDA regime than the one of UPA.
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