Assume that the US is an isolated territory, a separate planet.
Assume that every dollar is a gold coin of one gram. And there is no silver in the US.
Assume that all gold has been mined and melted into gold coins. That is, no more gold coins are being added, nor gold is being used for any other purpose.
Assume that the year is 1600 AD.
Production starts rising. Then industrial Revolution happens production rises even more, then oil age, then computer Revolution. Production is US $18 trillion. What will be the rise in the value of one dollar, that is one gram gold coin? Assume that the coin that was able to purchase x gram wheat will now purchase 1000x gram wheat. Because wheat production has risen 1000 times.
That is, if currency, the medium of exchange, is kept constant in amount, but productivity, and hence total production rises, the value of currency, that is, its purchasing power will continue to rise.
Now, suppose there is another planet, planet of lazy souls, India.
Assume all above assumptions, except that metal is silver, and the year is same 1600 AD. And there is no gold in India.
Assume that exchange rate in 1600 AD was one gram gold =one gram silver. And one gram silver in India also buys x gram wheat.
Assume that Indians do not increase production, instead they press NOTA all these years.
What will be the exchange rate in 2018? Since in India silver will still buy x gram wheat only, exchange rate will be one gram gold=1000 gram silver.
Replace dollar for gold and rupee for silver and you will now know why rupee is falling.
Yes, production in the US is rising. The US GDP is growing at the rate of 3%. Ah…..you say,”We are growing at the rate of 8.2%.”
But the problem is that the US GDP is 18.7 trillion dollars, it will add US $ 561 billions in one year, while we with an economy of 2.8 trillion dollar will add only US $ 230 billions.
And they are 30 crores, and we are 132 crores, so on per capita basis they will produce ten times more than us in 2018 alone.
Yes, those rich “over-sexed, over-paid” thugs are going to become even richer thugs than us in this year also.
And so the dollar is rising, because dollar can buy more in the US now.
1. If they start printing dollars, dollar will rise less, may even drop against rupee.
2. If they do not print more dollars, but we print more rupees, rupee fall faster.
3. If India’s GDP rises faster, and US GDP slows down, fall of rupee will slow down, or even may stop.
What should the Govt/RBI do? Answer: Nothing. Nothing must be done by Govt/RBI to stop the slide, because every action will lead to transfer of our wealth to America, and only the fall will be postponed, but will return in bigger size.
Only way out is for us to work harder.
Some day we may work harder of course. …….after we are through with our fights for and against reservation, for and against this and that act, over this or that costlier commodity.
But आप तो NOTA ही दबाइयों।