Email of the day (2)
Comment of the Day

September 12 2013

Commentary by David Fuller

Email of the day (2)

On the Indian Rupee
"You may recall I have a niece living in New Delhi. She has offered an unsolicited query to me regarding the Rupee.
"Popular/educated opinion here is that it will hit 75 to the dollar before it begins to go back down again. However the falling rupee hasn't, as far as I can tell, effected the common person yet. Prices in Delhi haven't risen yet, but people seem to think that inflation will soon catch up with the rupee's fall. Normal people aren't concerned with the rupee, but the wealthy/elite are (obviously) freaking out. It seems it's all anyone has talked about in months. I think people are trying to figure out ways to get around the new laws, and get their money out of India. It's an interesting time for sure...

"I find the 75 figure interesting. I also find the inflation fear rhyming with U.S. fears - which remain unfounded. Your take?"

David Fuller's view I do recall mention of your niece living in Delhi and the views of business-savvy people on location can be insightful.

Eoin and I felt that the move looked climactic after the surge to INR68.80 versus the USD, concluding that a peak of at lest near-term significance had been reached. India's RBI also intervened at that time so in spite of India's economic problems, I would not assume that we will see INR75 (weekly & daily) anytime soon.

India's chaotic economy, which includes some expensive subsidies that have to be lifted periodically, has an inflationary problem which was exacerbated by the Rupee's slump. This is very different from the US economy at present. I think US inflation will rise when the velocity with which dollars change hands increases and the economy really strengthens. However, this is unlikely to be a runaway inflationary problem because competitive pressures internationally and also domestically from robotics, should prevent the surges in wages that I recall being particularly endemic in the 1960s, 1970s and periodically throughout the duration of the last century.

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