1. Indian
Economy
Fiscal
year
2013-­‐14
Falling
Rupee,
rising
$
and
Common
Man
in
India
August
2013
1

2. Indian
Rupee
and
US
$
PresentaDon
on
Ø Why
Value
of
Rupee
has
gone
down?
Ø Factors
responsible
for
slide
of
rupee.
Ø What
is
the
possible
soluDon
by
poliDcal
leadership,
common
man
and
businessman?
2

3. What
is
Current
Account
Deficit
(CAD
)
In
simple
terms
Ø Difference
between
value
of
goods
and
services
Exported
(
Sent
out
of
India)
and
Imported
(
Brought
in
India)
is
CAD.
3

4. What
is
Current
Account
Deficit
(CAD
)
In
simple
terms,
Ø When
Country
is
spending
more
than
it
is
taking
from
abroad,
CAD
is
created.
4

5. What
is
Current
Account
Deficit
(CAD
)
In
simple
terms,
Ø CAD
means
Country
is
net
debtor
to
the
World.
5

6. CAD
and
US$
vs.
Rupee
Ø Higher
the
debt,
lesser
the
confidence.
Ø Risk
taking
ability
is
reduced.
Ø Capacity
to
negoDate
is
reduced.
Ø Higher
lending
rates.
Ø Margins
/
surplus
(income
over
the
expenditure)
come
under
greater
pressure.
Ø But,
CAD
is
not
the
only
factor
to
prompt
this
cyclic
effect.
6

7. 7
India
Current
Account
Deficit
&
Historical
Exchange
Rate
Year
Quarter
Current
Account
Balance
(Current
USD
Bn)
USD/INR
Closing
Exchange
Rate
2008
Q2
-­‐1.53
46.26
Q3
-­‐3.27
48.43
Q4
-­‐12.58
50.53
2009
Q1
-­‐11.67
47.89
Q2
4.75
48.15
Q3
-­‐4.45
46.50
Q4
-­‐9.20
44.83
2010
Q1
-­‐12.19
46.20
Q2
-­‐12.80
44.57
Q3
-­‐12.10
44.95
Q4
-­‐16.90
44.68
2011
Q1
-­‐9.98
45.03
Q2
-­‐6.30
49.09
Q3
-­‐14.10
53.07
Q4
-­‐18.90
50.78
2012
Q1
-­‐19.60
56.81
Q2
-­‐21.70
52.86
Q3
-­‐16.40
54.78
Q4
-­‐22.30
54.29
2013
Q1
-­‐32.63
59.49
Q2
-­‐18.10
63.36

8. 8
-­‐1.53
-­‐3.27
-­‐12.58
-­‐11.67
4.75
-­‐4.45
-­‐9.20
-­‐12.19
-­‐12.80
-­‐12.10
-­‐16.90
-­‐9.98
-­‐6.30
-­‐14.10
-­‐18.90
-­‐19.60
-­‐21.70
-­‐16.40
-­‐22.30
-­‐32.63
-­‐18.10
-­‐40
-­‐30
-­‐20
-­‐10
0
10
2008
2009
2010
2011
2012
2013
India
Current
Account
Deficit
Current
USD
Bn
Source
:hbp://www.tradingeconomics.com

9. 9
Co-­‐efficient
of
DeterminaDon
(R2)
is
38%
Which
means:
only
38%
of
the
changes
in
Exchange
Rate
can
be
related
to
the
current
account
deficit
and
balance
62%
to
other
factors
(Such
as
Purchasing
Power,
Investment
Paberns,
Etc.)
1.53
3.27
12.58
11.67
-­‐4.75
4.45
9.20
12.19
12.80
12.10
16.90
9.98
6.30
14.10
18.90
19.60
21.70
16.40
22.30
32.63
18.10
46.26
48.43
50.53
47.89
48.15
46.50
44.83
46.20
44.57
44.95
44.68
45.03
49.09
53.07
50.78
56.81
52.86
54.78
54.29
59.49
63.36
-­‐20
-­‐10
0
10
20
30
40
50
60
70
-­‐10
-­‐5
0
5
10
15
20
25
30
35
2008
2009
2010
2011
2012
2013
India
Current
Account
Deficit
vs
USD/INR
Exchange
Rate
Current
USD
Bn
USD/INR
Deficit
Surplus

10. 10
India
Imports
Breakup
USD
Bn
Imports
USD
Bn
Imports
%
Year
Oil
Gold
Others
Total
Oil
Gold
Others
Total
2002
15.31
4.56
36.41
56.28
27.20%
8.10%
64.70%
100.00%
2003
18.50
4.06
41.90
64.46
28.70%
6.30%
65.00%
100.00%
2004
21.04
6.64
52.32
80.00
26.30%
8.30%
65.40%
100.00%
2005
31.87
11.18
75.86
118.91
26.80%
9.40%
63.80%
100.00%
2006
46.33
11.47
99.26
157.06
29.50%
7.30%
63.20%
100.00%
2007
58.54
14.87
117.26
190.67
30.70%
7.80%
61.50%
100.00%
2008
81.67
17.26
158.70
257.63
31.70%
6.70%
61.60%
100.00%
2009
96.57
21.29
190.67
308.52
31.30%
6.90%
61.80%
100.00%
2010
90.79
29.76
180.09
300.64
30.20%
9.90%
59.90%
100.00%
2011
109.36
41.92
229.78
381.06
28.70%
11.00%
60.30%
100.00%
2012
158.35
57.45
283.73
499.53
31.70%
11.50%
56.80%
100.00%

11. 11
Indian
Lust
for
gold
Import
of
Gold
in
India
Year
Rs.
in
crores
Growth
Rate
1999-­‐00
17991
2000-­‐01
18829
4.7%
2001-­‐02
19889
5.6%
2002-­‐03
18608
-­‐6.4%
2003-­‐04
29946
60.9%
2004-­‐05
47348
58.1%
2005-­‐06
47951
1.3%
2006-­‐07
65440
36.5%
2007-­‐08
67330
2.9%
2008-­‐09
95324
41.6%
2009-­‐10
135878
42.5%
2010-­‐11
184742
36.0%
2011-­‐12
269563
45.9%
Cumula)ve
total
of
imports
made
in
last
13
years
makes
it
to
the
tune
of
Rs.
1018839
crores.
If
converted
in
USD
at
current
price
of
USD
(65),
it
becomes
156
billion
USD

12. 12
Import
content
of
Oil
and
Gold
are
rising
on
year
to
year
basis
where
as
other
things
remained
stagnant
and
then
declined.
Alarming
trend
for
growth
of
economy.
The
signals
on
India’s
growth
story
(8%
to
9%)
being
wrong
were
evident.
15
19
21
32
46
59
82
97
91
109
158
5
4
7
11
11
15
17
21
30
42
57
36
42
52
76
99
117
159
191
180
230
284
56
64
80
119
157
191
258
309
301
381
500
0
50
100
150
200
250
300
350
400
450
500
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
India’s
Total
Imports
USD
Bn
Oil
Gold
Others

13. Indian
Economy
Contributories
to
rise
in
CAD
Three
Factors
influenced
increase
in
CAD
1.
Rising
Oil
import
bill
In
10
years
(2002
to
2012)
rise
is
10
Dmes
From
15.31
billion
$
to
158.35
billion
$
13

14. Indian
Economy
Contributories
to
CAD
Three
things
have
affected
the
CAD
2. Indian
Lust
for
gold
Ø
In
10
years
(2002
to
2012)
rise
is
12.5
Dmes
From
4.56
billion
$
to
57.45
billion
$
Ø CumulaDve
import
bill
for
10
years
is
220.46
billion
$
(
Non
producDve
asset)
Ø Had
this
not
been
imported
(possibly
hoarded),
India’s
Foreign
Exchange
reserve
would
have
been
about
433
billion
$
against
278.81
billion
as
at
16.8.13
(RBI
Data)
14

15. Indian
Economy
Contributories
to
CAD
Three
things
have
affected
the
CAD
3.
Decrease
in
import
of
goods
and
services
other
than
oil
and
gold.
This
has
negaDve
effect
on
economy.
Capital
goods,
payments
for
technology
imports
etc.
are
parts
of
this
import
bill.
These
are
the
drivers
of
growth.
15

16. Falling
Rupee
and
rising
US
$
Other
factors
which
has
promoted
this
slide
External
Factors:
Ø Assump)on
that
growth
in
India
was
spontaneous
and
self
propelling
proved
wrong.
Ø It
was
not
that
Indian
economy
which
was
growing
fast
or
beber
than
others
but
US
economy
was
not
doing
well
was
the
reason
that
money
came
to
India
for
beber
returns
from
the
year
2007-­‐08
onwards.
16

17. Falling
Rupee
and
rising
US
$
Other
factors
which
has
promoted
this
slide
External
Factors:
Ø Money
which
came
to
India
were
mostly
short
term
investments
in
FII’s
–
Debt
and
Equity.
Ø Long
term
Investment
in
India
–
Foreign
Direct
Investment
(FDI)
has
remained
lower
than
FII’s
invesDng
in
India.
17

18. Falling
Rupee
and
rising
US
$
Other
factors
which
has
promoted
this
slide
External
Factors:
Ø Once
the
US
Economy
is
giving
signals
of
improvement,
flight
of
money
has
started.
Ø Rate
of
interest
in
US
has
improved,
so
bonds
of
Indian
market
are
redeemed
and
money
is
going
back
to
other
countries.
Ø Greater
peril
may
come,
if
European
economy
improves
sooner.
18

19. Falling
Rupee
and
rising
US
$
Other
factors
which
has
promoted
this
slide
Internal
Factors
Ø Reforms
have
been
ignored.
Ø Populist
measures
like
subsidies,
grants
took
prime
posiDon
Viz.
Diesel,
FerDlizer,
Food
etc.
–
Burden
to
naDonal
income
as
against
the
investment
in
Infrastructure
and
core
Industries.
19

20. Falling
Rupee
and
rising
US
$
Other
factors
which
has
promoted
this
slide
Internal
Factors
Ø Investor’s
confidence
has
been
affected
by
retrospecDve
amendments
in
law,
endless
liDgaDons,
corrupDon
stories
(
2G,
Coalgate
etc.)
coupled
with
indecisions.
Ø State
Vs.
Center
Leadership
and
governance
issues.
Ø Bable
between
Judiciary
and
polity.
Ø Trust
in
the
leadership
is
at
low
level.
20

21. Falling
Rupee
and
rising
US
$
Other
factors
which
has
promoted
this
slide
Business
and
Polity
(State)
-­‐
(A)
In
the
maze
of
judicial
acDvism,
government
inacDon
(
or
corrupDon)
industry
and
businesses
in
India
are
suffering
enormously.
1. Coal-­‐
Inspite
of
having
300
billion
ton
of
coal
reserves,
India
to
pay
about
8
billion
US
$
for
import
of
appx.
82
million
tons
of
coal.
(
Coal
Gate
LiDgaDon)
2. Natural
Gas:
Court
to
intervene
in
pricing
of
gas.
KG
basin
producing
minimum
gas.
21
(Curtsey:
ArDcle
by
Mr.
Mukul
Rohatgi
TOI
26/8/13)

22. Falling
Rupee
and
rising
US
$
Other
factors
which
has
promoted
this
slide
Business
and
Polity
(State)
(B)
In
the
maze
of
judicial
acDvism,
government
inacDon
(
or
corrupDon)
industry
and
businesses
in
India
are
suffering
enormously.
3. NaDonal
Highway:
NHAI
suffers.
Kishangadh-­‐
Udaipur-­‐
Ahmedabad
555
km
highway
held
up
in
liDgaDon.
Environment
clearances
held
up.
4. TelecommunicaDon:
FDI
for
2012-­‐13
Rs.
1654
crores
but
in
previous
3
years
totaled
Rs.
58782
crores
(
Down
by
82%)
[
2G
LiDgaDon)
5. Iron
Ore:
India
is
having
one
of
the
largest
resources
of
Iron
Ore.
But
now
is
the
net
importer.
22
(Curtsey:
ArDcle
by
Mr.
Mukul
Rohatgi
TOI
26/8/13)

23. Falling
Rupee
and
rising
US
$
Other
factors
which
has
promoted
this
slide
Business
and
Polity
(State)
Ø In
such
state
of
uncertainty,
which
businessman
would
have
confidence
to
invest
in
new
business
or
to
expand
the
exisDng
one.
Its
in
fact
difficult
to
protect
the
exisDng
one.
Ø While
the
businesses
are
facing
the
down
cycle,
high
inflaDon
and
pressure
from
foreign
markets,
the
State
has
generated
problems.
Ø Repeated
/
retrospecDve
amendments
in
law.
Frequent
changes
in
monetary
policies
have
shaken
the
confidence.
23

24. Falling
Rupee
and
rising
US
$
Indian
economy
can
be
further
affected
by:
Ø Business
failures
and
insolvency
(expected
that
25%
of
corporates
would
be
unable
to
service
the
debts
in
next
one
/
two
years)
Ø Low
industrial
producDon
Ø Rising
prices
Ø Higher
InflaDon
24

25. Falling
Rupee
and
rising
US
$
Way
Out
?
No
short
term
soluDon
is
visible
as
the
flood
gates
are
already
open.
Slow
and
steady
recovery
is
possible.
25

26. Falling
Rupee
and
rising
US
$
Way
Out
?
For
External
factors:
Ø Confidence
building
is
necessary.
Ø Change
in
polity
–
State
must
act
posiDvely
and
decisively.
26

27. Falling
Rupee
and
rising
US
$
Way
Out
?
For
External
factors:
Ø Promises
given
by
the
Government
(whichever
Party)
must
be
fulfilled.
Ø LiDgaDons
must
end.
27

28. Falling
Rupee
and
rising
US
$
Way
Out
?
For
Common
man
/
Middle
class
/
rich
Indians
:
Ø Don’t
buy
gold
for
at
least
5
years.
Ø Reduce
your
petrol
consumpDon
(
at
least
25%).
Travel
in
common
pool
or
public
vehicle
and
avoid
unnecessary
use
of
petrol.
Ø Use
Indian
goods
as
far
as
possible.
Ø Work
honestly,
improve
your
moral
standards.
28

29. Falling
Rupee
and
rising
US
$
Way
Out
?
For
Business
/
Industry
:
Ø Don’t
borrow,
if
you
can’t
pay
back.
(you
decide
and
not
the
lender)
Ø Try
to
produce
more
with
Indian
inputs.
Ø Export
the
goods
/
services
as
much
as
possible.
Ø Import
capital
goods,
technology
and
adopt
it
as
fast
as
possible.
Ø Don’t
liDgate,
if
you
can
avoid
it.
Ø Avoid
corrupDon,
moral
and
real;
both.
Ø Start
new
businesses
(in
India)
in
rural
/
semi
urban
areas.
29

30.
PresentaDon
on
Falling
Rupee,
rising
$
and
Common
Man
in
India
Thanks
By
Divyang
Majmudar
Spectra
Management
Consultancy
Chartered
Accountant
Pune
Ahmedabad
30