At the time of Independence, the Indian rupee was one to the US dollar. Since then, the rupee has been constantly getting devalued and, finally, on August 22 it crossed Rs 65. Within 66 years of Independence, our currency has been down by 65 times against dollar. This makes it clear that we as a nation have not taken adequate measures to keep our currency strong enough in the global market.
Now we talk about stabilising the rupee. Stabilising at whatIJ Should we focus on policy measures to aim at bringing the rupee back to its level at the time of IndependenceIJ It may seem impractical, but what’s wrong in aiming at something that will make India proudIJ Some have even remarked that the country is heading towards bankruptcy; some say it’ll be another Greece story.
True, the country appears to be moving towards a financial turmoil, but we as Indians are still one of the richest communities in the world. The Indians control the motel business in the United States; the IT Industry is dominated by Indians; in Europe, the Indian business community is probably the wealthiest; the diamond business in Belgium is dominated by the Gujaratis; even a small British colony like Gibraltar is crowded with Indian shops, mostly Sindhis, where even the Spanish and the British are employed by them.
In Africa, mostly the heavy Industries including traders of small and large volumes are basically by Indians. Durban in South Africa is probably the wealthiest city crowded with mostly Indian communities. The textile and the gold market in the Middle East is dominated by Indians. Also, in the Far East, including Hong Kong, Indians have proved to be one of the most successful business communities. large farms in Australia and New Zealand are also owned by Indians, besides varieties of business that the Indians control in this continent.
The Indians do dominate abroad in various sectors, especially that of the IT sector. Indian entrepreneurs have battled alien conditions and immense odds with grit and persistence to establish a stronghold in many pockets of Europe and command a substantial market share in the United States. It is, therefore, a paradox that while our credentials abroad which indirectly affect our domestic performance are strong, but the Indian rupee is dwindling.
Truly, to combat the freefall of the Indian rupee, one must understand the scenario in a larger scheme of things.
The depreciating Indian rupee has not marred our economic performance but on the contrary has unlocked new pathways of growth that lay unexplored and a window of opportunity that lies untapped. A cheaper currency can be used to an advantage of a new Chinese-inspired strategy, which uses enhanced export-oriented growth.
Export-oriented growth uses the strategy of putting a weaker rupee on a pedestal of strength and provides access to a larger global market share. This way, the lower currency can be used as a strategic lever to accomplish higher economic performance and secure greater global market shares.
However, truly to enhance the export of Indian products, one must look into the growth engine of a country, the MSME sector. The MSME (micro, small and medium enterprises) sector pitches in a massive share of exports, and neglecting the development of this sector could be a fatal blunder. However, what is it exactly that the causes the MSMEs to underperform or even failIJ While there are many factors, the most important of them is the lack of availability of funding by banks and use of coercive and inappropriate policies that majorly hinder the entrepreneurial progress of the MSMEs, namely, the NPA (non-performing assets) norms which impair proper functioning of the MSMEs.
The NPA period for export-oriented units is 90 days, which has a severe debilitating effect on potentially strong or well-performing units that might need some more time to return credit as gestation periods of production cycles are long in these units. Forcing a unit to prematurely return credit or tagging it as NPA not only jeopardises export and thereby economic performance but also retards national productivity and subsequently the GDP (gross domestic product) of the country. Swift action needs to be taken to steer clear of such malignant bank policies and export-oriented MSMEs need to be given special attention.
India is now in a position of advantage, and using this brief window of opportunity to strengthen the MSME sector will yield good results. Since the rupee has performed worst amongst all Asian countries, it is actually in the most superior position of advantage vis-a-vis the other countries in terms of trade and world exports. The rupee is better-placed to be more affordable to the rest of the world than ever before. Also, two of the largest markets in the world, the USA and Japan, are growing like they’ve never done before.
This has provided India with a fertile ground and a window of opportunities to truly enhance its economic performance.
However, this window of opportunities will not last forever and needs to be taken advantage of quickly before the global situations change. With policies favouring the MSMEs, especially the ones that have to do with the NPA norms, we will be in a position of immense advantage as we will then quickly be able to cater to the global demands and secure a large share of global market.
We now stand at a critical juncture where we need to turn over a new leaf instead of carping over our sinking rupee and pessimistically hunkering down. That the rupee is at 60 a dollar is a huge opportunity for us. With the fall of the rupee and enhanced productivity of the export-oriented MSMEs, we will be 25 per cent to 30 per cent more competitive than our rivals in the global market, says Prakash Nedungadi, Head of Consumer Insights and Brand Development, Aditya Birla Group.
That being said, productivity of the MSME sector needs to be paid attention to as the units which are capable of supplying the market with timely stock can sufficiently cater to the world market demand. This will enhance the GDP and bear good results on our overall economic performance.
(The writer, the Working Chairperson of the Entrepreneurs & Finance Customers Association of India- EFCAI, can be contacted at efcai12@gmail.com )