The Indian rupee keeps on sliding.

Here’s why
By Nupur Anand • September 11, 2018

AP PHOTO/TSERING TOPGYAL
Dollar’s strength, rupee’s loss.

The tough times just refuse to end for the Indian rupee.

Over the past few months, the depreciating value of the domestic currency in relation to the
US dollar has been the focal point of economic turmoil in the country.

On Monday (Sept. 10), the rupee nose-dived to a new historic low, ending at Rs72.45 to the
dollar. In this calendar year alone, its value has eroded 12% against the greenback, making it
one of Asia’s-worst performing currencies. It was mostly weighed down by rising global
crude oil prices—India imports nearly 80% of its fuel needs.

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Year-to-date performance vs. the US dollar

Euro -3.3%
British pound -3.6
Sri Lankan rupee -5.5
South Korean won -5.5
Indonesian rupiah -9
Indian rupee -12
Russian ruble -18.2
South African rand -18.7
Turkish lira -41.3
Argentinian peso -50.3
 Data: FactSet | Dec. 31, 2017 to Sept. 10, 2018 Share

The higher import bill has also widened India’s current account de cit (CAD), with imports
now being much bigger in value than its exports. The CAD is expected to widen to 2.8% of
the GDP in nancial year 2018, up from 1.9% last year, according to a report by Nomura
Research. This, in turn, does not augur well for the rupee.

In the past month, the rupee’s depreciation has accelerated due to many global factors. For
one, the US and China have been at loggerheads, each slapping duties on the other’s
imported items. There is speculation that China may devalue the yuan to outdo the US;
this is likely to have a ripple effect on other currencies, including the rupee.

Then there is the US’s trade war with Turkey. It has imposed higher tariffs on Turkish steel,
aluminium, and other commodities, delivering a big blow to the lira which has fallen by over
40% this calendar year. This, too, has dragged down currencies of other emerging economies,
including India.

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In contrast, the US dollar has consistently gained strength this year due to an uptick in
economic growth. The country’s GDP grew 4.1% in the second quarter of this year, the
fastest since late 2014.

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china, donald trump, narendra modi, south africa, india

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