Adversities should be seen as opportunities. It is time the government sets up alternative energy sources on a war footing.
Whether the rupee slides further south from `60 to a dollar or not is a matter of serious concern, but of greater concern is the absence of any robust, inspiring action from the government to take advantage of the slide to boost sections of the economy, particularly manufacturing, which can benefit from a weakening rupee.
Unfortunately, exporters have not been able to take advantage of the weakening rupee as, apart from the effects of the global economic slowdown, they are not as competitive as our neighbours.
The rupee has been weakening from the beginning of this financial year. In May-June alone it lost a massive 11 per cent of its value. It is estimated that for every 10 per cent depreciation in the rupee, wholesale inflation is pushed up by 1.5 per cent to two per cent. This is because imports, from fuel to electronic goods and raw materials, become more expensive.
Rising fuel imports have already posed a tremendous challenge to the government’s attempts to trim the fiscal deficit by increasing fuel prices intermittently and hoping to trim fuel subsidies. Global fuel prices have actually come down eight per cent, but with the rupee weakening by 11 per cent India cannot take advantage of this fall in fuel prices. The result is that the subsidy burden is expected to rise to `1,30,000 crore and could upset the government’s attempts to cut the fiscal deficit.
Adversities should be seen as opportunities. It is time the government sets up alternative energy sources on a war footing. The minister and ministry concerned should be given ambitious targets and held accountable for achieving them, of course with the necessary support. Similarly, the National Manufacturing Competitiveness Council should give the country a report on its activities.
If the present state of the rupee is worrying, the future is even more so. The ominous signals, for the developing world, from US Federal Reserve chief Ben Bernanke, who said the Fed would begin tapering off its monetary easing programme by the end of 2013, is enough warning for India to get its act together. There is a view that Mr Bernanke gave this signal more to deflate the bubbles created in the gold, real estate and commodities markets because of excess liquidity in the system. Whatever it may be, it is time for the government to gather all the smaller business and trade associations, which are doing well and could do better with a little help from the government, and see how manufacturing can become a vibrant sector once again.
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