Sinking Rupee: Need for course correction, fuel hike crippling, unjust

Swadeshi Jagran Manch expresses deep concern over fast sinking rupee against foreign currencies and its impact on the general public, economy and image of India in the world. Rupee has slid from 48.7 to 56 rupees per US $ in a span of only 3 month, which is a record.

Imports, especially of crude oil, industrial raw materials including metals are becoming costlier, making the life miserable for people and increased suffering for the industry. Common man already reeling under inflation is forced to pay high price of petrol through his nose. Indian students studying abroad are also bearing the brunt. Growth of industrial production has entered into negative zone and government seemingly not doing anything to arrest the slide of rupee. Swadeshi Jagran Manch is of the strong opinion that the wrong direction of government policies and its failure to act appropriately and timely has been responsible for miserable condition of the rupee. 

We would like to remind that SJM has time and again forewarned the government to stop liberalization of imports against national interest. But government has not given any heed to the same, and imports have reached a record of US $ 488 billion in 2011- 12. This has resulted in the balance of trade deficit of US $ 185 billion in 2011-12, which is turning out to be more than 11 per cent of GDP, and cannot be financed through normal channels namely software exports, remittances from NRIs and necessitates external commercial borrowings, FDI and FIIs.

If we go into the composition of increase in our imports, dangerous trends are emerging, which are against our national interests:

Imports of gold has reached US $ 50 billion in 2011-12, against  US $ 25 billion in 2010-11, sending rupee to troubled waters. It is worth mentioning that there seems to be a direct link between 2G Scam, CWG Scam etc. and import of gold, as scamsters are converting their black wealth into gold.

Import of crude oil is on rise for two reasons, one increase in price of crude oil and two increase in the quantity imported. It is true that we don’t have much control on international crude price. However we can definitely decide the source of our imports. It is no secret that we are importing 9 per cent of our oil needs from Iran. As per the trade agreement reached between India and Iran, we can make 45 per cent of our oil payments in terms of rupees to Iran, doing away with requirement to pay in dollars. Recent statement of the government that they intend to further reduce the sourcing of crude oil from Iran, seemingly under the influence of USA, is unfortunate and is causing stress on already troubled rupee.

Crude oil imports from Iran has already declined by about 34 per cent in April 2012 compared with March 2012.

In the earlier times, we have been allowing large scale investment by institutional investors.

Due to crisis in the Western Europe, FIIs have been indulging in flight of capital from India, raising the demand for foreign currencies, causing damage to our currency. On earlier occasions also they have been adopting the same practice and caused heavy damage to our national economy. This has all been due to the insensitivity of the government. It is unfortunate that the government is sitting idle and doing nothing to restrict these FIIs.

Last but not the least, imports from China has consistently been increasing and trade imbalance with China has reached to the level of US $ 25 billion in 2011-12. Increasing imports from China is not only causing heavy damage to our domestic small and medium industry, it is also causing drying up of order books of our infrastructure and machinery industry and companies like BHEL, L&T are coming under stress.

In view of the gravity of the situation, Swadeshi Jagran Manch demands:

1. Effective quantitative restrictions are imposed on the import of gold. We welcome the increase in import duty on imported gold in the Union Budget 2012-13. But we believe that this is not sufficient to bring down increasing gold import, we need to impose quantitative restrictions on import of Gold.

2. Restrict FIIs and impose at least 3 years lock in period on FIIs and impose heavy tax on the profits repatriated on the lines of Brazil.

3. Step up imports of crude oil from Iran, instead of reducing the same, crossing ‘technical hurdles’ without coming under USA’s pressure.

4. Take effective steps to bring down imports from China, invoking phyto sanitary and health measures, anti dumping and security issues.