Comments by "Raju" (@rajx7120) on ""RBI is being like the ‘George Soros’ of the Indian economy, undermining the currency”" video.

Problem is Supply and demand, alone doesn't determine value of rupee. RBI's intervention also determines. RBI bought too many dollars in last 3 years, when dollar was cheap, to keep rupee undervalued. But today, it is not willing to sell the dollars, to make rupee appreciate. What Mr. Shenoy is saying is, RBI should sell more dollars, fast.
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Amazing. Liked every word of Mr Shenoy. Allow rupee to appreciate. Now, even if this causes loss to exports, or a drop in salaries of IT service folks, it will be offset by cheaper petrol, that we would benefit from.
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Fiscal deficit has nothing to do with imports. And fiscal deficit is not a problem, as long as GDP grows more than the deficit, to cover that up. Now, how you use that borrowed money is what determines, how much GDP growth will happen, and hiw much inflation will happen, as it is dependent on the multiplier effect. Infra spending has multiplier of 3, whereas subsidies and revenue expenditure have a multiplier of 0.95. It's the difference between taking loan to enjoy life vs taking loan to upskill yourself, and get a job that pays back your loan. Still India's FRBM Act mandates a limit of 3.5% fiscal deficit, which was breached after pandemic, but has been coming down since. And your blaming of fiscal deficit, breaks down in the case of US, which enjoys printing the reserve currency and exports inflation. Lastly, even if fiscal deficit becomes zero, doesn't mean imports will become zero. Import and export are dependent on needs of the economy. We don't produce enough crude oil, edible oil, and pulses. And we buy lot of gold for cultural reasons. Now, if govt borrowing is used to say, discover an oil field, or build nuclear power plant, and build better highways that improve fuel efficiency, then our energy imports will come down. For pulses and oilseeds, we really need to diversify out agriculture. Some of the inflation of fruits and vegetables, are due to broken market linkage because of which farmers destroy the fruits and vegetables for lack of a better price. Enabling direct sales between farmer and buyer would fix this issue, and was part of the APMC Amendment Act that is now repealed due to pressure from Punjab. Rupee is made to fall, to benefit exporters, and to have a buffer of dollars in critical times. Deepak Shenoy argues that, we have too much buffer, that we are hurting today's growth for fear of tomorrow's uncertainties.
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@abhishekinfra Fiscal deficit alone is not the major factor. Overall productivity of a nation matters. If the deficit is used to improve productivity by investment then you won't get inflation.
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@abhishekinfra No. Our deficit has not been equal to growth on average after 1991. During Vajpayee era, UPA 1, and pre-pandemic Modi era, fiscal deficit has always been less than 3.5% and GDP growth has always been above 6%. Only during UPA 2 and post-pandemic Modi era, did fiscal deficit grew beyond 3.5%. Yet, inflation was less in Modi era than UPA 2, because UPA 2 used the borrowing for revenue expenditure, whereas Modi 2.0 used it for capital expenditure. So, it's not about "mismanagement". It's about right policies vs wrong policies. And the rupee has never been "allowed" to fall, but it wasn't allowed to rise either. As long as America has power of dollar, all other currencies will suffer. But, liberalizing the currency, will allow periods of appreciation as well. That's the crix of the discussion.
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