The impact of depreciation of rupee against dollar on economy has caused woes for not only common man but also for the people coming from middle and upper classes. Economists have failed to figure out the reason behind such a sharp decline in the value of rupee. However, it is being perceived that the currencies of other economies are also getting weaker against dollar, but slump in the value of rupee is stunning because India’s position is said to be among strongest economies of the world. Expressing his opinion in this matter, the chief economic advisor of the Ministry of Finance, Kaushik Basu, says that present trend is like a bubble and Indian currency will soon bounce back, but one thing has to be noted that the future trade is being fixed at an exchange rate of Rs 60 per dollar. It indicates that rupee can go weak at the rate of Rs 60 per dollar. If the assessments of Kaushik Basu prove to be correct, that means if the rupee recovers soon, those companies are sure to incur heavy losses which are trading while speculating the future exchange rate at Rs 60 per dollar. Whatsoever be the clarification of the Centre over present trend of declining rupee, but it is a fact that RBI’s inapt policies are also responsible for the present situation. RBI governor repeatedly reassured the people that action would be taken to stop the declining trend of rupee, but to the hilt.

The worst impact of depreciation of rupee has appeared in the form of steep rise in the prices of petrol. In the wake of rising import bill of petroleum products, the oil companies hiked the price of petrol by Rs 7.50 at once. Surprisingly, this hike was announced on the very next day of the end of the Budget Session of Parliament. It is clear that the Centre was not ready to face the opposition parties after the petrol price hike. Now a new trend is being witnessed that decisions on the controversial issues are being taken ether prior to the Parliament session or after the session ends. However, mere hike in petrol price will not be enough to make up the loss being incurred in importing the petroleum products. The government is well aware of the fact that the subsidies given on diesel, kerosene and cooking gas are the main reason of this loss. The government is not ready to reduce the burden of the subsidies due to the compulsions of the vote bank politics.

Though, the government is well aware of the fact that the subsidy granted on diesel and kerosene is being misused, but it is not in a position to take a bold measure in this regard. It is hard to infer that what political gains the Centre and the Congress party are willing to draw by first allowing a rise in the prices and then announcing a slight reduction. It is also difficult to understand that why those political parties are not willing to ask the state governments to reduce VAT on petrol, which are opposing the decision to hike the prices of petrol. After all, why all the state governments are not toeing the policy of the Goa government which has decided to charge almost zero VAT on petrol. If they are unwilling to follow it, why are they pressing the Centre to slash its taxes on petrol?

Undoubtedly, depreciation of rupee is not solely responsible for the economic distress, rather government’s predicament on taking some decisions is also accountable for it. Speaking on the occasion of the completing three years in office in second term of UPA, Prime Minister Manmohan Singh and UPA chief Sonia Gandhi said that it is required to deliver rather than making promises only. But none of them is in a position to say, why the necessary works are not being executed. It is being talked for the past one year that there is a need of taking bold measures on economic issues, but nothing has happened in this regard. It has been observed in most of the cases that important decisions are avoided in the name of assembly elections in near future. Some decisions were put on hold in the name of West Bengal elections whereas some others were suspended in the name of UP assembly elections. Now it is said that those necessary decisions will be taken after the Presidential election. Everyone is of the opinion that some stringent measures need to be taken in order to improve the economic condition, but none is in a position to tell that when such decisions will be taken.

If the government believes that it has started taking bold measures by allowing petrol price hike, it is wrong. Actually this move is nothing but only putting burden of financial deficit on the shoulder of common people of the country. It is like punishing innocent people for the government’s own idleness. The problem has deepened because the government has neither been able to curb the prices nor has been securing proper storage of the food grains. In the light of ongoing wastage of food grains at a large scale due to the lack of proper storage facilities, it shows that politics on food grains is going to hit crumbling infrastructure. The farmers who get minimum support price for their crops are in trouble due to excess of production whereas other farmers are in problem due their very low return which is even less than their investment. The government must realize that the farmers are still committing suicide.

Now, the time has come that the political parties should evolve a consensus over how to stop such programmes and schemes which are against the rules of economics. Even common man should also be aware of the fact that the sops like subsidies or other populist schemes could appear to be benefiting them but in reality the government shades the burden of such things finally on people only. People need to understand that their sufferings on the fronts of education and health care facilities are being caused due to subsidies on fuel whereas the government will also have to realize that European economies are in trouble due to these kinds of sops. It will be nice for the ruling, both the states and Centre, if they agree to stop overlooking economic rules.

(An original copy of the article published in Hindi on May 27, 2012 translated by the English Editorial. The author is Group Editor of Dainik Jagran)