Twinkle Like A Star

Posted by Dr. Gopal Unnikrishna Kurup

Twinkle Like A Star

In the darkening twilight
When shadows lengthen,.
And the hues become lighter
The sky shines ethereal,
You twinkle like a star.

Then the sea sways less
Sending shimmering waves
Leans on the land in embrace
And finds its peace with heavens.

Lo!, a light breeze wings from afar
Like a white bird darting from a star
To flutter your sleeves of lace,
And strands of hair to your face
Mentioning its message to your eyes
Making them twinkle like stars.

When it grows darker and darker
And all the cows come home
The sad courtyard lies lonesome
Staring at the cloudy sky for cover
Beckoning me to come step over
And watch you twinkle like a star.

Akhilesh Yadav: The Man in a Muddle, with Muzaffarnagar Riots

Posted by Dr. Gopal Unnikrishna Kurup

Akhilesh Yadav: The man in a muddle, with Muzaffarnagar Communal Riots

At no point did Akhilesh seem to think that the situation would get out of hand in a manner that the Army would have to be called in for the first time in over a decade to control a communal flare-up in Uttar Pradesh. It was a severe indictment of his administration, for this was not a riot that came like a bolt from the blue. It had been festering for a while, and Akhilesh as well as his officers were well aware of this.

    His Director General of Police had just returned from the area a day before and told him matters were under control. Prior to that, a Senior Additional Director General of Police had been sent from Lucknow and deployed there specifically to handle the situation. Akhilesh was confident that the worst was over in Muzaffarnagar—an assessment that would prove to be terribly wrong as the day wore on. Rajendra Chaudhary, the lone Jat minister in Akhilesh's cabinet, kept wondering if the situation had really worsened. Because this area of riots were considered a stronghold of Rashtriya Lok Dal (RLD) leader Ajit Singh.

Uttar Pradesh has a population of nearly 200 million with socioeconomic indicators worse than many parts of sub-Saharan Africa.The state has a long history of sectarian violence. Sushilkumar Shinde, the India's home minister, said that 451 incidents had been reported to date this year in Uttar Pradesh, compared with 410 throughout 2012. Many are now nervous that rival political groups will seek to exploit communal tensions to build support in advance of general elections scheduled for next spring.   .

However, it is said that the communities in Muzaffarnagar involved in the weekend violence did not have a history of tension. The immediate cause of the weekend's violence appears to be the killings in Kawai village of three Jat men following an incident involving the sexual harassment of a Hindu teenage girl. According to one account, the brothers of the girl killed her persecutor but were then killed themselves by members of his sister's tormentors belonging to Muslim community.  Sexual harassment of women is widespread in rural villages in Uttar Pradesh and often leads to feuds and violence.  Politicians had extinguished any chance of a return to normal. Just three days after,, on Friday, after Friday prayers, a meeting was called by religious leaders and politicians in Muzaffarnagar, around 125 kilometres north east of Delhi. with an audience of about 2,000 people, most of them Muslims, local leaders from the Congress and Mayawati's Bahujan Samaj Party or BSP ttaking the stage. Rioting began in earnest on Saturday night after a meeting of thousands of  farmers called .or justice following the deaths. Officials said some leaders of all the political parties had given hate speeches.

When asked why they didn't intervene to have the meeting cancelled, local officials claimed they had been misled. Kaushal Raj, the District Magistrate of Muzaffarnagar, said that religious leaders had said the meeting would focus on collecting a petition demanding justice in the Kawal case, but that the gathering was then hijacked by the politicians - Qader Rana and Jameel Ahmed of the BSP, and Saeed-uz-zaman of the Congress. On Saturday evening, at a mahapanchayat, BJP leaders from the area addressed thousands of farmers with allegedly incendiary speeches, charges they have denied. On their way home, farmers were attacked and killed. Since then, 36 people have died.

Uttar Pradesh is seen as a bellwether state, sending 80 representatives to the lower house of parliament, almost a seventh of the total.The SP won state elections in 2012 and will hope to garner sufficient national seats in Uttar Pradesh in the coming general elections to negotiate from a position of strength when a coalition government is formed.Samajwadi party (SP), in power in the state since 2012, may be hoping communal tensions will consolidate its own support, particularly among Uttar Pradesh's large Muslim population

India's Infatuation for Gold

Posted by Dr. Gopal Unnikrishna Kurup

India's Infatuation for gold

   

They say in Western culture that a diamond is a girl’s best friend. So, if a diamond is a girl’s best friend in America, gold is even more than that in India. India's infatuation with gold is phenomenal. It is deeply ingrained in our socio-cultural practices with wedding seasons seeing the maximum purchase of the metal. In fact, India’s love for gold is ancient as the Indus Valley civilization, (circa 2500 BC), when people wore gold jewelry. The Gupta dynasty (250 AD) is known as the Golden Age, when gold coins were circulated widely. The gene is still strong and we cannot have  enough of gold. Therefor gold is country's biggest import after oil.  Cultural factors, such as festivals like Deepavali and Akshaya Tritiya, both considered auspicious occasions to buy gold.  Gold  is far more than just a nice thing to wear at Indian weddings. It's a  key element of the religion and culture in a country that consumes 20%  of global production of the metal. In India it is status symbol, sign of  respect, inflation hedge, repository of emergency savings and, of  course, something to make the bride shine. This has led to a spurt in purchase in the recent years which has caused a rocketing of India’s imports of the metal. The government seems to have woken up quite late to the fact that banks have been en-cashing on the average Indian’s infatuation with gold.

   

Indian households have piled up as much as 20,000 tonnes of gold, worth $1.16 trillion, an historic high. The World Gold Council’s (WGC) latest estimate of India’s household gold reserves is 11% higher than the 18,000 tonnes it had been pegged at earlier. Coupled with 557.7 tonnes of the central bank’s holdings, gold stocks at known sources in the world’s largest consumer would represent more than 75% of its gross domestic product. According to the Reserve Bank of India (RBI), the country is the largest gold importer in the world with about US$56 billion worth of the yellow metal coming across borders during the 2011-2012 fiscal year. On top of that there are about 400 tonnes of scrap gold entering the Indian market every year, worth another $17bn or so at today's prices.

   

But why is gold being made such a villain as it is made now all of a sudden ? Twenty two years ago, when our economy was tottering, it was this yellow metal which rescued it from a probable collapse. India had to airlift 47 tons of gold to the Bank of England and 20 tons of gold to the Union Bank of Switzerland in 1991 to raise $600 million to tide over payment obligations. Not only that, the yellow metal has rescued several households during crisis. In the last few decades, gold has been used as collateral for loans especially for the home loans. Such schemes were also promoted by private and public sector banks aggressively. If the government was so wise, why didn’t it stop banks from doing so when they started?

In fact, it is the same UPA government (which is now advising Indians not to buy gold) that went ahead and bought gold from the international monetary fund (IMF). In 2009, when the IMF started limited gold sales programme, it was the RBI which bought 200 tonnes of gold valued at Rs 31,490 crore ($6.7 billion). At the time, many analysts hailed it a ‘course correction’ of the 1991 decision of the government. The RBI’s move was not bizarre because dollar was weakening and the apex bank built its reserve on gold to shift away from holding assets in dollars.

   

The crux of the matter is that the gold should be used for what it is good at, that is, a hedge against inflation. Timothy Green, a well-known gold expert, reminds us of a historical truth: “The great strength of gold throughout history has not been that you make money by holding it, but rather you do not lose. That ought to remain its best credential”.

   

It is the the import of such huge quantities of gold needed to satiate India's huge appetite for it, and the inability of the Indian government to properly regulate those imports, has contributed to the record current account deficit that has in turn led to a generational depreciation of the rupee. The nation's swooning economy, marked by a sharp drop in its currency in recent weeks, has pushed gold prices sharply higher, pain that's been compounded by a government decision to increase import duties on precious metals to 10% from 4%. The government now sees in the yellow metal a detriment to the nation’s economy.The government's decision to increase the tax on gold just before the November-February wedding season indicates how worried Indian economic planners have become as fiscal deficits have soared, the trade deficit has hit 4.6% and stocks have headed for the basement, knocking nearly $100 billion off the market's value in August.

Adding to the bad-news drumbeat, foreign reserves have fallen to $280 billion, or the equivalent of seven months worth of imports, and economic growth has plunged to 4.4%, less than half its 2010-11 level Meanwhile, the rupee's 16% decline against the dollar this year has made it among Asia's worst-performing currencies, forcing Indians to pay more for gasoline, imported medicines, foreign trips and education. "India has become the sick man of Asia," said Rajiv Biswas, Asia-Pacific chief economist with IHS, a market information firm. "Global investors have gradually realized in 2012 and 2013 that the Indian government is 'wearing no clothes' in the area of economic policy reforms."

   

The steps India needs to take are evident, but they are politically difficult. They include cutting subsidies and other populist welfare policies that drive up government deficits; reducing red tape, opaque regulations and inconsistent tax policies that deter investors; intervening in currency markets earlier; and addressing a string of corruption scandals in the defense, real estate, telecommunications, mining and sports sectors. Bureaucrats and politicians are in paralysis and don't want to make decisions because all around them is some sort of scam.

   

Obama's Baby Missile Attack On Syria

Posted by Dr. Gopal Unnikrishna Kurup

U.S.A.'s Threat of Missile Attack on Syria

Russia on Tuesday announced that its early warning system had detected the launch of two ballistic missiles from the central part of the Mediterranean Sea fired towards the Sea's eastern coastline. According to the Russian media the missiles detected have fallen into Mediterranean sea. That was the only cue needed for the Indian nervous stock market to react depressingly.The Sensex slumped 700 points, Nifty fell over 200 points and the BSE banking index fell up to 5.3%, - all after the Russian defense ministry's announcement.

While world leaders grapple with what to do about Syria, the reports of carnage on the ground keep rising. At least 118 people were killed across Syria on Sunday, including 13 children, the opposition group Local Coordination Committees of Syria said. And 63 people were killed across the country on Monday, including eight children, according to the opposition Local Coordination Committees of Syria. State-run news agency SANA said the army killed "scores of terrorists" Monday and destroyed their hideouts.The United Nations has said more than 100,000 people - including many civilians - have been killed since a popular uprising spiraled into a civil war two years ago.

Public opinion may be a poor guide to the low-down of state policy. But that opinion carries the burden of two long wars, both failures. As a result, leaders have been sufficiently cautious to pass decision to their national assemblies. In British the result was a rebuff. In Washington, President Obama has decided to refer Syria to Congress and France's president, François Hollande, may do likewise.

Obama said Saturday, "We are looking at the possibility of a limited, narrow act.  But the administration will have to overcome "a lot of distrust among the American people" as well as of the world about the intelligence that accusing Syria's government of a poison gas attack outside Damascus in late August.

Russia rejects Kerry's claim that the United States has all the evidence it needs. China weighed in Monday as well. The United Nations, meanwhile, said evidence that could show whether chemical weapons were used in Syria was being delivered to a lab on Monday. But a U.N. spokesman would not estimate how long it may take to get results. Even when results are released, they won't show who was responsible

Britain, which was just as forceful a voice for military action as the United States, also won't take part after the House of Commons rejected a resolution that would have opened the door for British attacks against Syria. In Yemen, meanwhile, that country's parliament on Monday announced its opposition to any outside intervention in Syria. France, although a supporter, has said it won't act without the United States as a partner. And NATO itself won't take military action against Syria. So the world is looking at the United States, as to what it will do.

It is this stiff disapproval within and out that made President Obama decide to seek Congressional support. The Administration is trying hard to garner support for their “limited action”. Obviously, the main reason is that the they want to signal increased support for Syria's opposition in a bid to shift the balance of power in Syria's two and a half year-old civil war. Administration officials will be conducting classified briefings on Syria for Congress nearly every day this week. Obama will meet with House Speaker John Boehner and Minority Leader Nancy Pelosi, congressional aides said, and he'd already planned talks with the leaders of the key national security committees in the House and Senate.

Republicans hold the House, 233-200, with two vacancies. Obama's gamble to seek congressional backing carries many risks, chief among them is that Congress might thwart him and make him look weak around the world. Lawmakers are split, worried about whether military strikes could worsen the situation - partly because the opposition in Syria includes al Qaeda-linked extremists such as the al-Nusra Front. As a respite, following Obama's last-minute decision to hold off until Congress weighs in, no such action is expected until after lawmakers reconvene from recess on September 9

 U.S. Secretary of State John Kerry said Monday. Turkey, Saudi Arabia, and United Arab Emirates have offered the United States use of their military assets for action against Syria. However, two senior Arab diplomats said talks with Saudi Arabia and the UAE are preliminary, and no details have been discussed. Administration also lets it out that Blood and hair samples obtained from first responders through an "appropriate chain of custody" have "tested positive for signatures of sarin" gas. It's unclear exactly how the United States obtained the material independently of the United Nations.

The United Nations charter generally doesn't allow countries to attack other nations unless in self-defense or with approval from the U.N. Security Council. But United States, Britain, and France couldn't get support from the United Nations for a strike on Syria, because Syria's allies in the U.N. Security Council - Russia and China - are sure to block any U.N. effort. Russia, which has major trade deals with Syria, is sending a delegation to Washington for "dialogue" with members of Congress.

Under U.S. law, Obama doesn't have to get Congress' approval to launch military action. The 1973 War Powers Resolution authorizes a president to initiate an attack as long as he notifies Congress within 48 hours. But internationally, a U.S. strike against Syria could be deemed illegal.

The reason why a missile attack on Syria is proving so unpopular on both sides of the Atlantic has nothing to do with imperialist aversion. The reason is that it is a bad idea. "Punishing" a dictator for killing his own people by simply killing more of his own people seems beyond cruel. It seems stupid. It leads nowhere.

Syria has repeatedly denied being behind an August 21 chemical weapons attack that killed hundreds of people. Al-Assad's regime Monday asked U.N. Secretary-General Ban Ki-moon "to shoulder his responsibilities for preventing any aggression on Syria, Syrian President Bashar al-Assad, meanwhile, warned that a regional war could break out if Syria is attacked."The Middle East is a powder keg, and the fire is approaching today”

In Syria, an attack would be in retaliation for a suspected breach of international law on chemical weapons.  Action is described as merely punitive and a "deterrent", directed purely at a past incident of a deemed chemical massacre. A gesture war like this will not punish the guilty, who should be arraigned before a war crimes court. ‘Limited action’ will merely destroy buildings and kill people. It seems peculiarly pointless

In the attacks on Serbia, Afghanistan, Iraq and Libya, the goal of western intervention was at least clear. It was to topple a regime. Since the UN forbids such overt aggression against member states, action must be dressed up as humanitarian or to enforce UN resolutions. But everyone knows what is the intended outcome.In Syria's civil war, there is no moral high ground. There is only the quicksand of a wider Middle East conflict that the U.S. must carefully navigate.

Some of the strongest factions aligned against Assad's regime have links to al-Qaeda, which is waging a worldwide terrorist campaign against U.S. If the forces trying to topple Assad prevail, Syria could become the world's first al-Qaeda-led nation -- an outcome would almost certainly draw large numbers of U.S. ground forces back onto a Middle East.

An American military attack against Assad will strengthen the hand of those who want to turn Syria into an Islamic state. And if that happens, neighboring Jordan will almost certainly fall to a jihadist movement. The tumbling of those dominion due to an ill-conceived U.S. intervention in Syria's civil war might also bring down Iraq's government  which is wedged between Iran, Syria and Jordan. That fledgling government might not survive if it is surrounded by militant Islamic states

That is why the world is skeptical. It is not the west's "might is right empire" that should be in retreat. If it is the brazen deployment of aerial bombardment as a cure-all for the world's ills also, then some good would have been done. 

Asaram Bapu Godman Should Find Vishram in Rajasthan Jail

Asaram Bapu Godman Should Find Vishram in Rajasthan Jail

Finally, after much drama, the self styled godman Asaram Bapu has been arrested by the Rajasthan Police and taken to Jodhpur.

Every political party has an underbelly of vote bank politics which they keep under wrap of some ostensible and openly presentable pretext. Parties like Samajwadi (S.P.) or Janata Dal (United) (J.D.(U.) do not even bother to cover up. The Congress Party clothes it in some fashionable socialist  or democratic designs. The Bharatiya Janata Party (B.J.P.) has no ready-made vote bank; what it has is an amorphous , mutating body of voters shaped by political dynamics the  times. So they have their belly shown bare under their saffron shawl. Then, Narendra Modi comes along and readily changes the shawl color in to a tricolor and make it a designer wear. People are fascinated and ready to make a vogue of it.

Leaders are there in every political party whose knees jerk and mouths blurt. The B.J.P. has one such in Uma Bharti, the samnyasin for all seasons. With all the yogic powers even Muni Durvasas could.not contain his uncontrollable anger, what then of poor rolled-gold samnyasini like U.Bharti when it comes to impetuosity! Like a quarrelsome bahu she had wandered in and out of B.J.P. house. There could be a huff and hue in the offing unless snapped or snubbed by the party High Priest Advaniji.. As robes come, Asaram Bapu's is not even saffron. His is pure white lie.. He apparently takes out the dagger he hides under that white cloak very selectively and not certainly in presence of fellow samnyasins.. Then how could have she, being also a politician, given a testimony for this 'Bapu'. For a party with an amorphous plastic vote bank such utterances could lead only to a melt down of their rank.

It seems crowd pullers have a numbing effect on the loose tongues of politicians. What else explains the reactions of muted tones, deafening silence, and cliches like "let law takes its own course" indulged in by the major and even minor parties? Even after Uma Bharti did a song and dance for the benefit of Asaram, the  B.J.P. bigwigs kept a studied silence, unfortunately leading the juveniles among the party to synchronize with that jarring tune till the genuine pulse-feeling Narendra Modi instilled some sense into all of them. Modi is the only leader in India now who is tuned to people's rhythm and beat. Others sway to pop and rock or to some cock and bull.


The very concept of a vote bank , especially in case of minority communities may have to be studied more. Gone are the days when religion dictated the political responses of the masses. Today the common man especially the middle class by and large are more bothered by means to keep up with Joneses in social status, and prioritize securing modern material comforts more than spiritual adherence at any cost. Religion does have a place certainly but there is a separate space for it. Even in our interior villages the living room or drawing room gets the best attention, and the prayer room is sequestrated untainted by drawing room overlap. More and more people are adopting a stand of god's due for god and devil's due for devil. Muslim observers particularly negate the existence of any Muslim vote bank. They say, Muslims vote like any other Indian voter and not en masse on religious cues. Much of topsy turvy political antics defying sense and propriety will disappear once this reality dawns on our political class.

Meanwhile, the godman turned fraudman Asaram was running amok like a fugitive without vishram. As is the wont of things happening to ordinary folks, Asaram should have been booked many days back. Let him now find ultimate vishram in jail.

Yasin Bhatkal, The Indian Mujahideen Terrorist Don.

Posted by Dr. Gopal Unnikrishna Kurup



 Yasin Bhatkal, The Indian Mujahideen Terrorist Don.

 

The story of Mohammed Ahmed Siddibapa best known as Yasin Bhatkal is that of an average Muslim youth aspiring for redemption from his ordinary birth by being a fundamentalist. Rightly or wrongly, according to perceptions, his religion enjoins that other religionists are vermin to be eradicated, and that it is a noble service which will eventually be rewarded by a  lascivious lifestyle in life hereafter. It lifts them from the state of unequipped ordinariness, by such a dubious service to religion and community - the easy way for the unqualified. In other communities such riffraff turn in to bullies, dons, nihilists or Maoists.That is the only explanation for young Muslims turning to the path of terrorism

 Yasin Bhatkal, a class X dropout from the  coastal Karnataka town of Bhatkal, ( one account says he is an engineer) went on to become one of India's most wanted  terrorist. Security dossiers lists the name of the fugitive as Mohammed Ahmed Siddibapa alias Ahamed alias Yaseer. It says he was born on January 15, 1983, studied up to Class X and also Islamic issues, is 5 ft 6, fair, clean-shaven, wears "pant shirt" and moves with a laptop.

Yasin is wanted for bomb blasts in Gujarat, Bangalore and Hyderabad. His associates are Riyaz, Iqbal, Sultan, Muyeed and Shabbir. He speaks Urdu, Kannada and Nawayati, a local dialect. He had a passport issued in Bangalore which was valid until June 18, 2013.  Siddibapa,  notorius  as Yasin Bhatkal, is the co-founder and operational commander of the Indian Mujahideen, its official bomb-maker, trained bomb expert and the mastermind of nearly a dozen bomb blasts across the country who has been named in almost every terror attack since 2007. A proxy of Lashkar-e-Taiba, Indian Mujahideen (IM) was launched at the instance of ISI of Pakistan.


 Yasin's journey into the world of terror is said to have started in the early years of the last decade  He, along with brothers Riyaz and Iqbal — the three of whom would go on to found the IM — tried to attract Muslim youth towards their ideology before his family discovered his leanings and packed him off  to Dubai in November 2005. His life in Dubai is a bit of a blur. Intelligence agencies claim he escaped from Dubai and was seen with al-Qaeda supporters in Abu Dhabi. They say he managed to return to India in 2007 and rejoined Riyaz and Iqbal in Mangalore and was trained in making nitrate bombs. 

 The attacks he allegedly planned and the bombs he made and planted during these years killed more than 250 people and maimed many more in Gujarat, Hyderabad, Jaipur, Delhi, Bangalore, Mumbai and Pune  It was Safdar Nagori, a SIMI leader said to be Yasin's right-hand man, who blew Yasin's cover Nagori, who was interrogated by the Ahmedabad Detection of Crime Branch following the serial blasts there, is believed to have told them that Yasin was the "master-planner" of the Ahmedabad blasts.Another associate, Abrar Sheikh, a strong link between all the IM modules in the country and an understudy of Nagori, is said to have told police that he attended training camps as instructed by Yasin, who also closely monitored the camps.Besides, Pune resident Md Akbar Ismail Chaudhry, a key accused in the August 2007 Hyderabad twin blasts, had told the police that ahead of those blasts, he and an associate travelled to Bangalore and met Yasin. They were then taken to a farmhouse near Kopa in Chikmagalur in Karnataka, where Riyaz was present, and given training in the use of explosives and bomb materials 

In 2011 Yasin assumed the name  Shahrukh when he lived in Delhi for about six months  and got married to one Irshad's 21-year-old daughter. Irshad and Yasin allegedly ran a small ordnance and weapons factory in a room in Meer Vihar in West Delhi where police found six magazines, several ounces of ammonium nitrate, live cartridges and chemical substances. Ironically, it was named "Peace Engineering Works". 

Yasin Bhatkal who carried a reward of Rs. 10 lakhs on his head, was picked up from Pokhara in Nepal where he was living in the guise of a Unani doctor. The successful operation of the Intelligence Bureau, which was facilitated by Nepal, also yielded a bonus in the form of Asadullah Akhtar alias Haddi, an absconding front-ranking member of the Azamgarh module of the Indian Mujahideen (IM) who had played a crucial role in the 2011 serial blasts in Mumbai. With the police of different states on his trail, Yasin had made Nepal his base. He would come to India only for plotting and perpetrating terror attacks. The vast network of associates he had created in the nearby Darbhanga district helped him stay away from India and yet operate efficiently. In the event, it was the success of IB in tracking one of his assets which led to the high-ranking fugitive.
The arrest of Yasin, who carried a reward of Rs 10 lakh, is a major breakthrough for the Indian security establishment's efforts to neutralize IM which overcame setbacks inflicted by security agencies to resume its terror campaign against India.

India should have fast track courts to deal with terror cases. As things stand, these cases wind their way through our judicial system for years. Where the accused are indeed guilty and are finally convicted, this allows room for needless speculation on whether they are innocent and being framed. Where they are innocent, it does irreparable damage to those accused falsely, whether deliberately or because of a genuine error by the investigating agencies. Neither situation is desirable. Of course, fast track courts must not mean kangaroo courts in a hurry to reach a decision, never mind the evidence. The process should be rigorous. Indeed, the state must ensure that lawyers who appear for the accused are protected from harassment by others and where no one is willing to do so, it must provide quality counsel for the defense. Such an approach will ensure true justice, for the accused as well as for society and terror victims.

Why the Rupee is Weakening

Posted by Dr. Gopal Unnikrishna Kurup

Why Rupee is Weakening

   




   

 Depreciating rupee has spooked the markets and led to widespread speculation.  The rupee has collapsed, the stock market is falling - has India moved from a breakout nation to a breakdown nation in just a few months? The currency’s poor performance began earlier this year. Since late April, the cumulative decline has been 8.7 percent, with a 4.2 percent fall in May alone. And since May,The Indian rupee has declined by nearly 16% against the US and is now Asia's worst performing currency so far this year.
   
India, however, is not the only country suffering from a weakening currency. Other emerging markets like Brazil, Indonesia, Russia, Turkey and South Africa are also witnessing a huge currency volatility because of fears that US may end its quantitative easing by year-end.
   
Can we really leave the rupee to market pricing? We don’t have a choice but to live with market pricing. Nifty and the rupee are a thermometer. They are reporting that the patient has a fever.
   

Factors Involved:

Domestic: Various factors are involved in the steady decline of the rupee which impact on the rupee value vis a vis dollar in a cumulative, synergetic way. There are domestic and global reasons. Among domestic reasons are high current account deficit and growth concerns.

     Worsening Current Account deficit

 

 High Current Account Deficit (CAD) is the main reason that has continuously impeded all efforts of government in arrest the fall of rupee.  Current Account Deficit occurs when a country's total imports of goods, services and transfers is greater than the country's total export of goods, services and transfers. This situation makes a country a net debtor to the rest of the world.  India posted a record current account deficit of 4.8 percent of gross domestic product (GDP) in the year ending March. Government’s failure to explore new destinations has led to poor growth of exports. In the absence of a single window clearance system, and process delays, exports have failed to register good growth. Even traditional export areas have failed to show resilience making Indian produce globally less competitive
   
Rising import bill (arising out of gold and oil) is also a major factor that has curtailed government’s effort to tackle the fall of rupee. Oil imports account for 35 per cent of trade . Traders say there has been continuous demand for the greenback from oil importers, the biggest buyers of dollars in the domestic currency market, pushing the rupee lower. Similarly, falling gold prices have offset the government's and the central bank's moves to reduce gold imports, which increases current account deficit and weighs on the currency. Gold contributes to over 10/11 percent of the total import bill. During the first quarter, global demand for gold fell 12 percent to 856.3 tonnes against 974.6 tonnes in the corresponding period last year. But in India consumer demand jumped 71 percent to 310 tonnes, compared with 181.1 tonnes in the year-ago period despite repeated increases in import and excise duties by the government this year. Gold imports were 141 tonnes in April and rose to 162 tonnes in May. The govt. Could reduce it to 31 tonnes in June but the reduction could not be held for the month of July.

     Insufficient Foreign Direct Investment(FDI) inflows
 
The government has failed to tap major FDI inflow in the country. Instead, India has witnessed withdrawal of major projects by global giants Inordinate delays, land acquisition problems, government clearance delays, lack of promptness have all contributed to the withdrawal of major companies. Last year Indian companies spent more overseas than Foreign Investors in India. To prop up the rupee in the near-term, markets would need assurances that India can attract foreign flows in an increasingly difficult global environment. .
   
    Foreign Institutional Investment(FII) outflows

Overseas investors have pulled out nearly Rs 18,500 crore (about USD 3 billion) from the Indian capital markets in July.  Foreign investors have sold a net $11.6 billion of Indian debt and equities since late May. In their highest monthly outflow, overseas investors pulled out a record Rs 44,162 crore (over USD 7.5 billion) in the month of June. Outflows of FIIs have put a continuous pressure on rupee not allowing it to come out of the slump

Poor economic growth in the manufacturing, agricultural and mining sector has dented investor sentiment and they have become wary of investing in India. Reflecting a persistent slowdown, industrial production in June contracted by 2.2 percent.
   
Instead, traders fear this would impose capital restrictions that could adversely impact company profits and could also scare off foreign investors at a time when the expected tapering of US monetary stimulus is already creating uncertainty in emerging markets
   
Global: On the global front, the recovery in the US economy is expected to prompt the central bank there to end the loose monetary policy by the year end. At the global level, investors have been worried that the Federal Reserve will end its government bond-buying program. The implication is that if this happens, then the foreign funds that have been moving to emerging markets looking for better returns will return to the United States once bond yields there firm up. This would mean that there will be fewer flows to these developing countries, including India, which would pressure the balance of payments and in turn the domestic currency. . Anticipating this, foreign investors are pulling out their money from India to invest it back in the US, which is resulting in a scarcity of dollars in India. US recovery is also boosting the dollar strength.

This explains to a large extent an apparent paradox in the global currency market, where the dollar has been weakening against the euro, yet has strengthened against the currencies of most emerging markets that have been recipients of fund flows. Brazil’s currency has depreciated 7 percent in May, while the Mexican peso has fallen 4.9 percent, the South Korean won by 2 percent and the Russian ruble by 3.5 percent

The problem is that when fear sets in the foreign exchange market, it often reinforces the fundamentals. The threat of a further decline in the currency causes importers to rush in to buy dollars while exporters will hold back their dollars for conversion, thus exacerbating the demand-supply gap.
     

Action Taken to Stem the Fall

All that the govt. has done in stemming the tide down of rupee is in the field of fund outflow. Reserve Bank of India(RBI) last week had laid down restriction on Indian firms investing abroad. Simultaneously it also clamped down on outward remittances by resident Indians. but these actions have triggered talks of return of capital control regime.
   

Action Needed

There is a debate whether it is a good idea to use the forex reserves to prop up the rupee. Some experts say it’s a bad idea for two reasons. First, India’s reserves are not too large. The resources available to global speculators are vastly larger than those available to the RBI. Second, reserves are not net wealth that we can use as we please. They are the assets that balance the liability that is the Indian rupee, that is issued by the RBI. Selling one dollar means sucking Rs 64 out of the economy. Selling $10 billion means sucking Rs 0.64 trillion out of the economy.
   
In fact, a medium to short-term approach towards growth has to be adopted by the government.
   
We should undertake economic reforms so as to make the patient better. This requires reducing subsidies, reducing the fiscal deficit, enacting new laws that reform the government, and achieve better performance on core public goods such as the judiciary and law and order. much faster go on building infrastructure
   
The long-term strategy consists of two parts: First, we should engage in fiscal prudence, so as to boost domestic savings and thus narrow the current account deficit. Second, we should build sound frameworks for capital flows. It is truly painful to build and run a business in India. We must change that.
    

Rupee depreciation does have its advantages since it makes Indian goods cheaper overseas and therefore more attractive to consumers, which benefits exporters. But these days, exporters may not actually see significant gains as the global economy is still stagnant and the price advantage on exported goods may not materialize any time soon given their relative inelasticity. In fact, some importers of Indian goods are asking exporters to lower their prices on account of this price advantage. But given that India’s foreign currency assets have at best been stable at around $ 260 billion, there are limits on such intervention.