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Despite a 10.57 per cent fall since March 1, the Indian rupee is not the worst-performing currency vis-à-vis the dollar. It is the tenth-worst, after the currencies of Myanmar, Malawi, Brazil, Nepal, Swaziland, Namibia, Lesotho, South Africa and Bhutan.
Among the worse-performing countries, BRICS peers Brazil and South Africa have seen their currencies fall by 15.38 per cent and 10.61 per cent, respectively, against the dollar since March 1.
However, unlike the rupee, the decline of the Brazilian real is a well-thought-out strategy to help exporters. South Africa, though, has concerns similar to those of India — widening current account deficit being one.
India's other partners in the BRICS bloc — Russia and China — have also lost ground against the dollar since March 1.
The Russian rouble has fallen by 6.64 per cent against the dollar, but the tightly controlled yuan (renminbi) has only depreciated by 0.43 per cent.
Among the Asian currencies, the rupee is clearly the worst-performer. It was the biggest loser in 2011-12 as well, depreciating by 12.37 per cent.
External factors
The primary reason for the rupee's fall appears to be external. Rising oil prices have bloated the oil import bill and increased the demand for dollars. Worries about de-leveraging by European banks amid the worsening Euro zone crisis have also affected the sentiments.
Domestic factors also had a part to play, with sticky inflation and widening fiscal and current account deficits weakening the rupee.
In addition, confidence in the economy has been weakened by the perceived policy paralysis in the Government ahead of the 2014 general elections and proposals for taxation of foreign investment.
> arvind.jayaram@thehindu.co.in
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