#178 How Do I Raid Thee? Let Me Count The Ways

<strong>India Policy Watch #1:&#160;To Catch A Falling Rupee </strong><br/><br/><em>Insights on burning policy issues in India</em><br/><br/><em>&#8212; RSJ</em><br/><br/>The Indian rupee this week declined to an all-time low as it went beyond 80 per dollar. For reasons that aren&#8217;t always clear to me, this kind of thing makes a lot of news in India. I mean, it was 79.9 the week before. There isn&#8217;t a yawning gap between that and 80. Yet opinion pieces are written, cartoons sketched, and old tweets of macroeconomic theorists like Akshay Kumar, Juhi Chawla and Sri Sri (Sri?) Ravishankar are dug out to contrast their current reactions to this phenomenon with their past asides. The WhatsApp factory also rolls out their new models that suggest how a strong dollar is bad for the US economy and how this is some kind of a switch and bait move that we are making on them. Somewhere in many of our heads, the strength of the Indian rupee is no longer subject to the dynamics of the currency market. Like many things these days, it too is anchored to our self-respect. And since our national clarion call is <em>desh nahin jhukne doonga</em> (won&#8217;t let the country down), we then start working on the narrative that shows all of this in a warm, positive glow. <br/><br/>All in a day in the life of India.<br/><br/>Anyway, I thought it would be useful to take this moment to appreciate the winds that are buffeting it, the long-term view of what will actually strengthen the rupee and then zoom out a bit to appreciate what&#8217;s happening to the US economy and what it could mean for India. <br/><br/>The Safety Of Dollar <br/><br/>We will start with why has the rupee gone to 80 a dollar? The simple answer is the US dollar has been more in demand since the start of the Ukraine war than before. This is true for all currencies, not just the rupee, as the chart below shows.<br/><br/>There are reasons for this. The 40-year high inflation print that the US is witnessing month over month has turned the Fed hawkish. It is like