The Indian Finance Minister Mr. P.Chidambaram came this evening with a “communique” that he thinks the Government must have done [In reality for how long & for how many quarters the Government wants to do Lip Service ?]. Mr Swamy Iyer, Editor at the Economic Times ripped P. Chidambaram apart and raised few questions of which I remember the important ones – Why is the GDP Growth on Downtrend? It has been 12 months for FM in office why the so called Project Clearances have not transformed into Orders and the industry not working on the same ?
In this backdrop, Mr. Iyer told that FM appearing on Media to soothe the Currency Speculation may not give desired results as the GDP Growth has derailed and reached a 10 Year Low. Mr. Iyer further enlightened that in 1991 once the Indian Rupee Depreciated Against the USD, it never gained back and continued to slide. [I was intrigued by Mr. Iyer’s Comment and decided to find the journey of INR against USD]
The following chart shows the Historical Data of INR Vs USD between Jan-1973 to August-2013.
Note – Chart generated using Microsoft Excel with Data Points as Jan of every year with an exception in 2013, Jan and August 22nd values used for 2013.
Is the INR Undervalued to the USD ? Is there a Parallel to situation like in 1991-92 ?
I was too young and was still in High School to know anything in depth about the situation then. But data suggests that in between April-1991 through April-1992 INR depreciated from Rs 19 to Rs 29 against the USD, a whopping 52%. But then India didn’t even have the foreign exchange to get OIL and came up by Pledging Gold. However, today the situation is far better when it comes to Foreign Exchange Availability with India [ USD 270 Bn]. As evident from the Charts, the INR has depreciated enough in the last 2 Years from Rs 44 in July-2011 to Rs 65 in July-2013.
In Our Personal Opinion if we discount the Events such as the Fall of The Corrupt, Bad Governance of Policy Paralysis of UPA 2 [Under Performing Alliance], No Stable Government or Person in-charge to Drive the Economy, then INR at Rs 65 to USD appears fairly valued, and of course this is our personal opinion as the GDP Growth will go down the drains. Don’t forget how Ratan Tata, Kumar Birla & Keshub Mahindra DECLINED to meet Manmohan Singh on the latters Invitation to discuss the Economic Situation just couple of weeks ago as Mr. Singh has previously ignored to all their requests.
In case of Severely Fractured Mandate in the end of 2013 or early 2014 elections, INR at 75 to USD appears fairly valued to us as the word progressive reforms and policy will not be in the dictionary of the Thugs who will come to power in India, and of course this is our analysis which you are welcome to criticize 🙂