The rupee slid smoothly through 90; and even though it was hardly a surprise — it had been knocking at the door for the past week — the media was all aflutter. I have long felt that, for several decades now, the government has been using the rupee as a safety valve for failures in economic policy, and the brunt of this, of course, falls on the weaker sections of society, who are much more hard pressed to pay the costs of imported cooking and fuel oils.
India has 700-800 million poor people and it should be the government’s focused approach to design policy to address their needs, rather than simply succumbing to the aging Ronald Reagan approach of trickle-down economics. Nonetheless, I know there are educated, articulate voices applauding this approach in the interests of growth by promoting exports and protecting our weak industries from fierce Chinese competition.
The relation between currency depreciation and export growth
Although, over the past year, the rupee weakness has had virtually no impact on export growth, I recognise that over a longer horizon, continuing rupee weakening has certainly contributed to steady export growth. Over the past 10 years, the rupee has fallen by about 35% and exports have grown by 65% to $437 billion (in 2024-25); service exports too grew by 55% to $387 billion.
For comparison, China’s exports grew to $3.58 trillion — more than 4 times our total exports — even though the yuan only declined by 11%. Clearly, and not surprisingly, their structural ability to extract value from currency weakness is much stronger than ours.
Thailand, on the other hand, only saw 11% growth in exports over 10 years, but during that period the baht actually strengthened by 11%. Thailand is an interesting example since despite its strong currency, tourism has been a mainstay of its economy — it attracted 35 million tourists in 2024 compared with the mere 10 million that came to India.
Lessons for the future
Reportedly, tourism is one of the “sunrise” areas of our economy, but some hotel operators I spoke to in Goa told me they don’t see anything significant happening — Thailand has been and will continue to eat our BLD (breakfast, lunch and dinner). I have made reservations in Bangkok for the New Year and, judging from what you get there for what you pay, I fear they may be correct.
The truth is that in too many sectors we are a high-cost, low-efficiency economy. But, let’s focus on the positives — the new labour codes, for instance, could begin to make a difference. And there is much more to be done. Critically, the government needs to get out of its rah-rah self-congratulatory mode and really get down to business, addressing the long list of issues that have remained largely unchanged over the past 10 or 15 years — transportation costs, customs delays, incomprehensible rules, tax harassment, corruption, agricultural inefficiencies, and so on.
Of course, all of this will take time, and, critically, genuine commitment and, of course, luck. Else the rupee will continue its tragic tattered path and, sooner or later, the title of this piece — NEXT STOP 100? — will become a reality.
(The writer is CEO, Mecklai Financial)
Views are personal.