Column Inconvertibly dull

Font Size

Print

Feedback

Email

Discuss

: revert to another currency—phew, that is a long list of conversions and consequent risk of loss.

There are other reasons, too, for not doing business in rupee. Companies, which go in for dual listing in Mumbai and abroad, find they are often shortchanged when they convert the Global Depository Receipts into rupee. This happens because of the policy stance of keeping up a weak rupee. There is, therefore, always a sustained clamour to allow unlisted companies to list abroad, finance ministry denials notwithstanding.

India, at the present pace, will, therefore, end up as the first economic powerhouse that does business without a comparable powerful currency. The result of this asymmetry is evident in the stunted growth of the banking sector and the decline of the rupee as a medium for trade and commerce from the global market.

The international liabilities and assets of banks in India, inclusive of both Indian and foreign banks stood at just $50.6 billion as on September 2007, according to the latest RBI statistics. This is just fractionally above one month’s foreign trade bill for India. Terms like one trillion dollar economy or at the other extreme measures like $2 a day as an indication of poverty shows the discourse is off the rupee standard by a long shot.

But even as the rupee by all accounts seems to have already lost the race, it has, of course, not hindered the Indian companies from moving to the foreign shores. They have adapted themselves to the dollar peg just as the export houses have done so for decades. The difference has also become formalised in economic literature on Asian currencies. Chinese companies for instance use the dollar standard and remnimbi to do business with the rest of the world, which the rest of the world too recognises. For confirmation, just check out how Asian business news regularly quote the remnimbi for Chinese companies. But on the same platforms it is rare to get a rupee quote for an Indian company. No wonder that Indian media too now uses the dollar to compare economic news.