They are crawling out of the woodwork again repeating the same mantra: the solution to all economic woes lies in the devaluation of the rupee! 

These lobbies are a minority in the business community and they have been the same for eons. Entrepreneurs, some of whom have no foresight and no sense of innovation. Hapless businessmen who – once preferential tariffs and markets disappeared – were unable to compete in the real world. Devalue the rupee so that more of our cheap products can be sold on the world market. We make money, we pay salaries to our workers which – thanks to the ensuing inflation – cannot buy them much.  We fatten up. They starve. But they should be grateful they have jobs. 

These lobbies have always postured vis-à-vis the central bank and government. For the last several years, the latter stood up to them and kept our rupee reasonably firm and stable (maybe even too much for it favoured imports and consumption rather than exports and production), with inflation brought under control, ranging between 2.8% and 4%, thereby protecting our spending power. 

A few years ago, when the so-called Global Financial Crisis began biting, we saw some of these business lobbies gallop through the corridors of the central bank asking for a ‘gradual depreciation’ – it sounds more innocuous that way – so that they would have time to restructure and create more jobs. And of course, they subtly threatened lay-offs. The Bank gave them not a gradual but a good depreciation and asked them to use the opportunity to pull their socks up and restructure to face the new economic reality. Some did and they are better off for it today; others didn’t and they are exhorting for a devaluation of the rupee – which has admittedly strengthened in the last couple of months by almost 10% on average against the euro.  “Gradually” again, so don’t worry. You’ll have time to tighten your belt. The impact of the dollar parity? Don’t mention it! They don’t…

Rupee depreciation or devaluation – gradual or not – is an insidious tax on the working, wage slaving masses. It is a pernicious transfer of income and wealth from the proletariat to the rent-seekers. It creates an illusion of growth with the enrichment of plutocrats and oligarchs, or at least their companies but results in the pauperisation of the majority, ordinary working folks like us.

Of course, we are not asking for an artificially strong rupee – though there have been signs of this over the past years. Our currency needs to reflect the actual strength of the economy. As a nation, we are not exactly disciplined or hard-working. As a country, we are very wasteful, which makes for a rupee that is less strong than it could otherwise be. Let us be clear: Our long-term survival and progress depend on our productivity and competitiveness. 

The new government’s first measure was to keep its electoral promises of increasing the old-age pension and giving a pay rise of Rs600 across the board. That has created a feel-good factor in the population in general. If those increases were to be eroded by inflation resulting from conscious and deliberate currency depreciation, it would not only be unfair but deceitful too. Many of those who have received those increases do not even realise the ravages of inflationary depreciation on the little they were given and how their already eroded purchasing power will plunge even deeper under water. And some will no doubt thump their chest and pass themselves as economic alchemists endowed with the Midas touch. 

The challenge for the government is to push for more productivity and rise above populism. That is the only long-term sustainable solution. We hope the central bank does not give in to the demands and blackmail of a few rent-seekers. We work hard for our money. They have to work hard for theirs. We pay our debts. The country cannot dig deeper into our threadbare pockets to pay theirs too.  Even if this means losing a few of the less productive jobs.