Rupee Vs Dollar: Can former RBI governor strengthen rupee against the dollar? Know who gave advice

Posted on 21st Oct 2022 by rohit kumar

The rupee continues to weaken against the dollar. The Indian rupee touched an all-time low against the US dollar on Wednesday. It closed at 83.01 with a fall of 61 paise. This is the first time that a dollar has crossed Rs 83. The opposition has started surrounding the government regarding this.

 

 

A statement of former Union Finance Minister and Congress leader P Chidambaram has also come. Taking a dig at the government, he advised Prime Minister Narendra Modi. He said that if the rupee is to strengthen against the dollar, then former Reserve Bank of India (RBI) governor Dr. Raghuram Rajan should be consulted.

 

First know what P. Chidambaram said?

Chidambaram advised Prime Minister Modi. Said, 'I request the Prime Minister that if he wants to improve the rupee, then he should immediately have a closed-door meeting of Dr. Raghuram Rajan, Dr. C. Rangarajan, Dr. YV Reddy, Dr. Rakesh Mohan, and Mr. Montek Singh Ahluwalia to consider it. Should be called Finance minister, RBI governor and officials should also be present in this meeting.

 

Chidambaram further wrote in his tweet that the government seems helpless against the continuous fall in the value of the rupee. The falling rupee has an impact on inflation, current account deficit, and interest rates. He said that the government needs to take experience from the former economists of the country. Let us tell you that Rangarajan, YV Reddy, and Raghuram Rajan have been former governors of RBI. Rakesh Mohan has been the Deputy Governor. At the same time, Montek Singh Ahluwalia was the Deputy Chairman of the Planning Commission during the UPA government.

 

Now know what was the position of the rupee against the dollar at the time of Raghuram Rajan.

 

Raghuram Rajan was the 23rd Governor of the Reserve Bank. His tenure lasted from 2013 to 2016. On September 4, when he joined the post of RBI governor, a dollar was worth Rs 67.03. After this, it came down to Rs 63.17 in 2014. Meaning the position of the rupee improved significantly during this period. In 2015, the position of the rupee again started weakening and the value of one dollar increased from 63.17 to 66.16 rupees. It remained stable in 2016 and when Raghuram Rajan's term ended, that is, on September 4, 2016, the price of one dollar was Rs 66.67. Meaning, during the three years of Rajan's tenure, the rupee also moved towards improvement and then stopped only after coming closer to the position of 2013.

 

Now let us also see the figures between 2016 and 2018, when Urjit Patel was the governor. In those two years, the value of one dollar had increased from Rs 67.19 to Rs 69.79. Meaning the Indian currency weakened by 2.6 rupees in two years.

 

After this, the Indian currency suffered the most during the Corona period in 2019-2020. Within a year, the rupee fell by about four rupees against the dollar. In 2019, the price of one dollar was Rs 70.42, which reached Rs 74.10 by 2020. In 2021, there was an improvement in it and the price of one dollar decreased from 74.10 to 73.91 rupees. This year it has increased the most. Now the value of one dollar has reached Rs 83.01. Looking at the figures, there is a continuous devaluation of the rupee. It has picked up pace in the last few days.

 

How can the rupee strengthen?

To understand this, we have consulted the expert in economic affairs, Prof. Spoke to Pradeep Joshi. He says, “It is true that the position of the rupee against the dollar is deteriorating continuously, but the good thing is that it has also improved against the currency of other countries. For example, the position of the Indian rupee has improved against the currency of the Pound, Euro, and other strong countries.

 

Pro. Joshi further says, 'Right now the whole world is grappling with the ill effects of Corona and the Russo-Ukraine war. So how can India be saved from this? At present, foreign exchange with India is decreasing. If it increases, then the Indian currency will automatically strengthen against the dollar.

 

How does the value of the rupee decrease and increase?

Pro. Joshi said, “Every country has reserves of foreign exchange, from which it transacts internationally. The movement of the currency of that country is decided only by the decrease and increase in the foreign exchange reserves. If the dollar in India's foreign exchange reserves is equal to the US rupee reserves, then the value of the rupee will remain stable. If the dollar decreases with us, the rupee will weaken, if it increases, the rupee will strengthen. This is called the floating rate system. India adopted this system in 1975.

 

The rupee will strengthen against the dollar only if we spend less foreign exchange and get more or if we spend $100 to import some goods, then export the same amount of goods. This will stabilize the foreign exchange and strengthen the rupee.

 

The dollar and Rupee were equal in 1948

The rupee was stronger against the dollar before independence. Then the value of all international currencies was fixed by gold and silver. It is followed by the British pound and since the World Wars, the US dollar has played that role. By the way, after independence, that is, in 1948, one dollar was equal to 1.3 rupees. The value of the dollar in 1975 was Rs.8.39, and in 2000 Rs.43.5. Done. In 2011, it crossed the 50 mark for the first time.

 

Also Read: Rupee vs Dollar: Investors are avoiding taking risks amid fear of recession, due to which the rupee breaks to a record low level.