Indian Economy: These 5 big villains are standing in front of the Indian economy, don’t make India’s situation like Sri Lanka or Pakistan!
Highlights
- If the costly crude oil is making a dent in the treasury, the fall of the rupee is getting rid of the sweat of the government.
- All the problems are intertwined and end up troubling the common people in the form of inflation
- The biggest problem facing India at this time is the strength of the dollar or the fall in the rupee.
Indian Economy: Indian economy is passing through its most critical phase at this time. Two years ago, the corona epidemic had made ill not only humans but also the economic health of the country. The situation was improving in the last months of 2021, that the Ukraine war in February 2022 served as a scab on leprosy. Due to the war, the price of crude oil and gas jumped, economies like America and Britain trembled. At the same time, all the neighbors of India whether it is Sri Lanka or Pakistan, Nepal or Bangladesh, all have become poor and miserable.
Talking about India, despite being a strong economy, some crises are affecting us as villains. On the one hand, expensive crude oil is making a dent in the government treasury, while the depreciation of the rupee is getting rid of the sweat of the government. In fact all these problems are intertwined and are finally troubling the common people in the form of inflation. Let us know about these villains and how India can get rid of them.
Indian Economy
dollar strengthens or rupee depreciates
The biggest problem facing India at this time is the strength of the dollar or the fall in the rupee. You can call it two sides of the coin. The more America, which is facing recession, strengthens its economy, the economies dependent on the dollar will keep on rolling down. One reason for the fall in the value of the rupee is also the strength of the dollar, which is breaking the back of many developing economies not only in India. In Pakistan, 1 dollar is beyond 200, while in Nepal the exchange rate has gone beyond 400. With the dollar becoming expensive, all the goods imported into the country become expensive. Since 2014, it has broken up to 25 percent now. At the same time, in just one year, the rupee has depreciated from 74 to 80.
current account deficit
Current account tells the health of any economy. The problem here too is the costly imports due to the dollar and the continuing inflation in the foreign oil markets. The country is dependent on foreign countries for oil gas to fertilizers and electronic goods. When we import from abroad at expensive rates, the current account increases. According to experts, the current account deficit is expected to jump to 3.0 per cent of GDP (Gross Domestic Product) in the current fiscal from 1.2 per cent last year. Since the reasons for the widening of the current account deficit are international, in order to remedy it indigenously, the government will have to fill the deficit by tax or other measures, this will give a better fuel to the vicious cycle of inflation.
reliance on expensive fuel
Energy is the first requirement for any economy to grow in the world. But the Russia-Ukraine war did spark oil prices. Before the Ukraine war, in November last year, crude oil was around $80-85 per barrel. Which reached $140 by the end of March. Crude oil has remained above $120 for several months. This expensive crude oil has ruined many countries. At the same time, due to the weakness of the currency, oil prices are burning more in India.
decrease in foreign exchange reserves
As we mentioned earlier, the problems of the country are intertwined. The foreign exchange reserves of the country are continuously shrinking due to costly imports and strengthening of the dollar. The country still has enough money reserves for imports for about 11 months. But the increasing demand for the dollar is continuously putting pressure on it. The first four consecutive weeks of July saw a decrease in foreign exchange reserves. India’s foreign exchange reserves reached $ 573.5 billion at the end of the week on 29 July 2022. Which had decreased by $ 8.062 to $ 580.252 in the first week of July. At the same time, to strengthen the rupee, the Indian government has sold a huge amount of dollars.
America’s health
It is said that when America sneezes, the world gets fever. The 2008 economic downturn is a recent example of this. Even big experts are predicting a US recession for 2022. Inflation in the US is at a 40-year peak. In such a situation, the central bank there is making every effort to strengthen the dollar, for this interest rates are also increasing. But America is getting stronger due to this but developing countries are losing their sweat. Only in 2022, foreign investors i.e. FIIs have taken their money i.e. dollars back to America by selling shares worth 23 lakh crores from India. In this situation, the Reserve Bank of India will have to make its market friendly to foreign investors, so that foreign investors think of investing in India instead of America.
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