The rupee, once synonymous with national pride, has quietly slipped from political discourse. While it now stands at 85 to the US dollar, the decline from just four rupees in 1947 represents a staggering 21-fold drop. Yet, today’s leaders appear surprisingly unconcerned about this nearly three per cent depreciation in 2024.
Consider the notion of rupee-dollar parity: a single rupee equating to a single dollar. This ambitious concept suggests a nationalistic fervor, rekindling dreams of global esteem for India. Wistful thinking aside, one wonders if such parity could indeed elevate our international stature.
Amidst such an alignment, all global commodities would become astonishingly affordable for Indians. For instance, a $1,000 iPhone, previously priced at Rs 85,000, would drop to Rs 1,000. Similarly, a million-dollar home in the States would shift from Rs 8.5 crores to a mere Rs 10 lakh.
Conversely, the implications for Indian exports would be dire. What once cost an overseas buyer a manageable sum would now skyrocket. A simple Rs 1,000 T-shirt, formerly available at $11.76, would suddenly ask for $1,000. This represents a staggering increase of 8,500 per cent.
Such a scenario could devastate our economy. Our products, goods, and services would be unbearably costly for both domestic and foreign consumers. Only the likes of haircuts or surgeries—services that can’t be imported—would remain unaffected.
Luckily, we’re insulated from this dystopia by numerous barriers. The vast difference between rupees and dollars in GDP terms, and reliance on non-importable services, ensures protection. Living costs would spiral without economic activity, making international migration an attractive option.
The Reserve Bank of India (RBI) would face a crisis, with finite foreign exchange reserves depleting swiftly. At around $650 billion, these reserves wouldn’t last two-and-a-half months if parity was achieved. Certainly, the idea of the RBI swapping a dollar for a solitary rupee at 98.82% discount seems absurd!
In our not-so-perfect world, a unique price isn’t universal. The cost of coffee in San Francisco won’t match the cost of one in Mumbai, even after conversion. tariffs, diverse economies, and trade barriers ensure price disparity across countries.
Currency rates fluctuate, influenced by domestic and international economic factors, such as inflation and growth. A ‘weaker’ rupee dwindles purchasing power but bolsters selling power. Conversely, a ‘stronger’ rupee does the opposite—an advantageous shift for foreign sellers yet detrimental for locals.
Therefore, currency strength has little to do with a nation’s honour. So next time a message preaches the glory of 1 INR equating to 1 USD, resist the urge to pass it on.
