Is it true India going for currency devaluation under Modi govt?
Many people are saying Indian rupee dollar rate is equal to Rs 91 now and approaching Rs 92, earlier it was only Rs 68. As I saw these many posts on social media, I remembered that while I was in college in late 1980s, the rupee-dollar parity was at Rs 18! Many people often judge the entire Indian economy using USD-INR exchange rate. Whenever the Rupee value falls against US Dollars, they shout, ‘Indian economy is dead’.
In 1947, 1 USD was equal to only ₹3.30. Does that indicate Indian economy was the best then? No. In 1947, India's economy was severely underdeveloped (low GDP, high poverty and widespread unemployment) thanks to centuries of exploitation and colonial rule. Post-independence, Nehru era economic policy was socialist and pro-communist. So, Nehru and subsequent congress governments maintained strict government controlled exchange rate mechanism as done in most communist countries like China and Soviet Union. By keeping exchange rate steady, the government claimed stable USD-INR rate but exports failed to grow when imports were growing rapidly. This created huge trade deficits and the government borrowed from IMF, World Bank and ADB. Private sector was not allowed to grow under the license raj regime and PSU or government sector productivity remained low. Finally, India’s economy collapsed in 1991 when the country has foreign currency reserve for only 15 days of import. IMF supported bailout came and India was forced to devalue the rupee multiple times within a short span. It was a steep devaluation.
Afterthe1991 economic liberalisation, the USD-INR rate is a market driven price, largely determined by the market forces of supply and demand. Although RBI sometime intervene to prevent excess downgrade of rupee but this is not a norm. USD-INR rate is not a standalone performance index of the entire Indian economy. It is rather a reflection of the relative value between the two currencies. Yes, Indian rupee is not performing well but there are many currencies that are performing much worse.
If you look at USD-INR rate graph, the only decade where rupee done well against dollar is year 2000-2010. This decade saw good annual GDP growth under PM Vajpayee and Dr. Manmohan Singh. Unfortunately 2010-2014 tenure of Dr. Manmohan Singh was a disaster and that led to BJP government in 2014. Hence the need of the hour is high GDP growth and sharp focus on export growth. In this context some recent free trade agreements signed by Indian in 2025 and 2026 are potential export booster dose.
Only wealth creation and export strength will improve USD-INR rate
The first rupee devaluation was done by PM Nehru. In 1949, Britain devalued the pound. India blindly followed 30% devaluation because India was still dependent on Britain on many aspects. This was done abruptly, without debate, without sovereignty. The rupee fell by about 30 percent. The dollar was suddenly ₹4.76. This wasn’t a policy choice. It was a colonial hangover. PM Indira Gandhi repeated the same in 1966. The exchange rate devalued from Rs 4.76 to Rs 7.50 to the Dollar which was more than 57%. With that single announcement, the Indian Rupee lost something far more valuable than numbers on a chart. It lost credibility.
Several Gulf countries were using the ‘Gulf Rupee’, a special offshore version of the Indian rupee issued by India. Printed in red ink and marked with a “Z” prefix, it circulated widely across Kuwait, Bahrain, Qatar, Oman and what would later become the United Arab Emirates. Indian workers were paid in it. Local markets priced goods in it. Trade moved on it. The system had worked because the rupee was stable—and because India was seen as a dependable issuer. But the 1966 devaluation shattered that assumption. Gulf countries dumped ‘Gulf Rupee’ and strengthen USD.
Currencies, like reputations, are slow to build and fast to lose. Modi government need to focus on wealth creation, export thrust to revive the rupee. The current government’s make-in-India, skill-India, startup-India, PLI scheme subsidy etc. are steps taken in the right direction. Moving away from Nehruvian socialist economy and stop chasing government (sarkari) jobs is the need of the hour. Those who criticise PM Modi on USD-INR rate devaluation should also look at Nehru, Indira and UPA era rupee devaluations. Just ignore the social media posts by the leftists, communists, urban naxals and librandus from rival congress party. Many of them are actually Pakis and Kanglus (Pakistanis & Bangladeshis) opposing PM Modi on all fronts.
Picture source: Google / Respective rightful owner
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