By Brajesh Kumar Tiwari
If the currency of any country is stronger than other currencies, then the country’s economy is considered strong. The value of most things exported is paid in dollars. The US dollar enjoys the status of a global currency, which is why the value of the rupee against the dollar shows whether the Indian currency is strong or weak. The rupee hit a record low against the US dollar on July 1st and was trading at 79.11 per dollar. The rupee has been staggering since the beginning of the year. This is the biggest fall ever seen in the rupee and the rupee has come to its all-time low level.
Since independence, the rupee has depreciated almost 20 times: in 1948, 1 dollar was available at 4 rupees and then there was no debt on the country. When the first five-year plan was implemented in 1951, the government started taking loans from abroad and then the value of rupee also started decreasing continuously. The value of rupee depends entirely on its demand and supply, and imports and exports also have a direct effect. India imports more than exports. A country that imports more than it exports has a higher demand for dollars. India is one of the major importers of crude oil and imports about 80 per cent of the oil, undoubtedly the rising crude oil prices in the international market are the main reason for the fall in the value of rupee.
Although the central government has assured to make every effort to stop the fall of rupee, now the government will have to take concrete and tough steps. If the government tries to convert its economy dependent on oil, then we can save a huge part of foreign reserves and for this we all should consider alternatives to oil. It is time for Electric vehicles to need attention. The government has to move strategically towards controlling imports and increasing exports. It is time to effectively implement the ‘Make in India’ program, which even after eight years is far behind its effective contribution.
Today the share of the manufacturing sector in India’s GDP is 13 percent. Corona alone is not responsible for India’s manufacturing sector. Manufacturing accounts for 29 percent of China’s GDP. Other Asian countries with a larger share of manufacturing in GDP than India are South Korea (26 percent), Japan (21 percent), Thailand (27 percent), Singapore and Malaysia (21 percent), Indonesia and the Philippines (19 percent). It is true that the government is striving to create a competitive, dynamic environment to provide sustained economic growth and increase its relevance in international trade and the result is also visible in some sectors. A vivid example is the development of corona vaccines by Indian companies as a source of indigenous talent.
India has rapidly made its place in the Ease of Doing Business index released by the World Bank, India’s EDB rank was 134th in the year 2014, it has increased to 63 in the year 2021. India is ranked 43rd in the Global Competitiveness Report Index published by the Geneva-based World Economic Forum, up from 60th in 2014 But even the reforms in all these ranks have failed to revive the manufacturing sector and are not giving the required support to the Make in India campaign. Despite all efforts to promote self- employment, the level of unemployment has broken the record of 4 decades.
The manufacturing sector is constrained by strict regulations and policy, and the sector is struggling for large amounts of paperwork, labour, land or environmental clearances. Taxation and customs policies are complicated to the extent that it is cheaper to import things than to manufacture home appliances. India may in future make itself the next ‘global factory’ which is anyway fed up with China and is looking for alternative manufacturing hubs.
There is a need to free the manufacturing sector from cumbersome rules. Certainly, through such effective steps, the depreciation of the rupee against the dollar can be checked. Also, if we start using indigenous goods, then the cost of importing foreign goods will be saved. India has no time to rest. For India to become a $5 trillion economy by 2025, we need to export at least $2.5 trillion worth of goods and services, as exports currently account for about 25% of the total gross domestic product (GDP).
(Author Brajesh K. Tiwari is an Associate Professor at JNU at the School of Management. The views expressed in the article are of the author and do not reflect the official position or policy of FinancialExpress.com.)