Happiness is a hard -to-define word, especially when it comes to the factors that create this term. One of those things is money. Many people consider it a pragmatic part, however, who can ensure the happiness of human beings without money? Here is the googly thought, do you earn enough to survive the dwindling economy? Money is the value assigned to a commodity. On one hand money is used to buy the luxuries of life while on the other it is means to feed oneself two square meals a day. We all know about the dismal dip the Rupee has taken over the years. From hitting new levels of rock-bottom to a dwindling economy, the rupee is a perfect marker and litmus test. It is very clear that rupee has fallen down against dollar substantially during the last few decades.
I now present a layman’s guide to the Funda of the exchange rates of currency and its direct effect on the economy.
We now use the basic analogy used to explain exchange rates-trade of a single commodity.
* Suppose only rice (no Asian stereotypingJ) is traded between India and USA and cost of rice is Rs 40/kilo in India and a dollar in USA.
* Going by this assumption we equate Rs 40=$ 1
* Let the inflation rates per annum be 8% (current rate 8.28) and 2% respectively. So after an year the new price would be-
(40+(8/100)*40)=Rs 43.2 in India, (1+(2/100)*1)=$ 1.02 in USA, so the new exchange rate is 43.2/1.02
* Hence we could calculate the exchange rates and see the depreciation ourselves with new inflation rates off course.
That’s the simplest way I could put it, using the only shreds of Mathematics I remember. So the crux of this whole show-off thing I pulled off right now was to solely elucidate the fact that Inflation affects currency exchange rates. So a higher inflation rate would directly affect the money a student like me would have to shell out for a Masters or an MBA degree abroad. Such rates prove to be a travel or vacation bummer too.
There are many reasons for this. The market needs a trigger for a value to appreciate and depreciate and traders often provide this trigger. I would like to particularly focus on Inflation as it decreases the purchasing power of a nation and dip in currency flow rates
However, the Rupee is also correcting against all other major currencies, which points to the presence of other more potent reasons, which are bulleted below:
- High Inflation
- High Current Account Deficit
- High Fiscal Deficit
- Infrastructural and Procedural Bottlenecks in implementation of Projects
- Falling or Flat IIP numbers
- This is expected to continue, due to heavy load of short term (1 year) debt that is coming due in the next few months
In due course of writing this blog I found an apt example, the recent price hike of railway tickets issued by the Modi Government. After the hike in railway passenger fare by 14 percent, Railway Minister Sadananda Gowda said “To meet all the expenditures, I was forced to implement the orders given by the previous government.” His statement wasn’t welcome and received rave reviews from the Opposition. My Facebook newsfeed were plagued with updates like “Acche din aa gye ,14% hike” and many such failed attempts at sarcasm by hypocrites who are possibly posting them to woe a girl and show how well rounded they are. Am I about to enlighten you with the truth? NO.
Who knows the permutations and combinations in the Game of Thrones of Indian Politics, by the way I said Indian Politics here, it isn’t an excuse for readers to post spoilers as comments (“NOT TODAY”). However I do intend to provide a logical perspective to the issue as the hike is necessary for the economic slump UPA has dragged us into, there isn’t an alternative path and if there was it would only be delaying the KARMA of the previous government which would bite our sorry ass with increased magnitude later.
A message to you readers, the economy dip isn’t Raghuram Rajan’s JEE exam which he has to solve to alleviate us off our misery, here is what we could do. Next time your dad does not pay up tax money to buy you an Audi for your birthday, be a man, take a bullet for the nation and say with aplomb “Tata Nano is the dad and get ‘ya ol man trippin’(like a boss)”. Aside from the basic question of what are the proper uses of taxation, it may be observed that the purpose of raising revenue is itself closely tied up with inflation control. No apologies are necessary in considering taxation as a means of inflation control.
#AccheDinAbhiBhiAaSakteHain #TrueStory #GGMU 😛
