RUPEE BREACHES 67: FOUR MYTHS ABOUT INDIA AND THE POLITICS OF PESSIMISM
Firstpost, August 28, 2013
Why this panic about the rupee decline, asked Paul Krugman on 20 August, a day when the currency hit 64.13 forcing the RBI to intervene to pull it back to 63.25 levels at the close.
His contention was that a panic was unwarranted now as India's dollar denominated debt situation is not like the Asian crisis countries of 1997-1998 or Argentina in 2001 and the fall in the rupee was in line with the emerging market currencies.
“Now, the depreciation of the rupee will presumably lead to a spike in inflation - but it should be temporary. So at first examination this doesn't look like as big a deal as some headlines are suggesting. What am I missing?,” he said in his blog.
But then the rupee's record low was 64.13, a level which now looks like a strong one. The rupee has fallen 65 and 66 in a matter of 7-8 days and looks set to reach 70 faster than expected.
The Indian rupee breached the 67-mark in early trade Wednesday, hitting a record low of 67.98 against the dollar in a couple of minutes of trade.
(...) [article here]