My Blog: Bhaiya sabse badaa Rupaiya

A red flag was raised when Rupee breached the 60 to a dollar mark. While people were wondering if it might even fall to a level of 65, it actually fell freely to about 68. Now the doomsayers were out in swing – some even proclaiming Rupee will touch 100 to a dollar.

But in walked the new RBI governor, Raghuram Rajan with a slew of emergency reforms and yep the fall has been arrested and the currency has rebounded. Click here to see the list of measures undertaken to contain the dollar outflow and bring in more of the FII and NRI money. Now, backing all these moves and reforms has been Chidambaram, the finest FM that India has ever produced.

I remember last year, Sensex was lazily hovering around 16000 and it was no coincidence that soon after Chidambaram was made the Finance Minister the markets started on a bull phase. What surprised me actually was why was he ever made the Home Minister? Whose stupid idea was that? Chidambaram = Finance Minister; it is like he can’t be anything else. And how could he ever be the home minister? That is such a flop idea. Anyhow fast forward to the present times. As soon as the Rupee started depreciating, instead of internal party bickering and blame game, he spurred into action. Yea, it could have gone very well in that direction what with proposed food security bill, the ongoing NREGA bill and other populist schemes announced by Mrs. Gandhi. But instead of all that, Chidambaram simply cut to the chase. Oil and gold imports came under the scanner and so also wooing the FII money along with a quick change of RBI governor post.

Why was this so important? Actually the Rupee decline was far beyond the fundamentals – the Current account deficit has not undergone any sharp changes to warrant such a fall. Some Foreign funds fleeing the market in June – July 2013 triggered it and driven so much by sentiments, the currency markets overreacted. The ICU treatment of Rupee was essential as else it could have also led to a fall in Sensex and further fleeing of foreign funds. Financial markets most experience the dominoes effect.

But that is where having a shrewd savvy and experienced FM helps. Chidambaram responded in a heartbeat and a series of reforms were initiated. Most were good although I’m not sure why he told people to not buy gold. You see there is a thing about “the people” – if you tell them not to do something, that is exactly they will do. So Gold prices surged as people started hoarding “more” Gold since they were “told” to buy “less”. But there you have it – “people wisdom” – the cornerstone of a democracy. If you do not catch my sarcasm here pls do read my book “Democracy on Trial, All Rise!”

But I digress; anyhow back to the issue, unchecked Rupee depreciation would have been catastrophic what with already slowing down economy. Next year is also an election year – everything requires funds, we all know that. So, bhaiya sabse badaa rupaiya and thanks to the “kick ass team” of Chidambaram and Rajan, the rupee seems back in shape and I hope the recovery is here to stay.

Here is the story in pictures.

Rupee falls like a stone