The slew that failed

RBI came out with a slew of measures today to arrest the Rupee fall. The piddly nature of the slew meant that markets tanked, and the Rupee hit a fresh low. Actually the steps announced by Mr. Rangarajan (RBI top honcho) reminded me of the battle scenes from Ramayan telecast on DD in the 90s. The battle lines are drawn, and the crowd is expectant. Mr. Rangarajan lifts his bow and lets outa slew (the third slew in this para) of arrows. The arrows fly in tandem towards the market. (music dhanadang dhanadang dhanadang in the background) Before reaching the target, the arrows stop and fall in one shot. Camera zooms back to Mr. Rangarajan who bangs his chariot in disgust and disappointment.

C'mon, if these are the aces up your sleeve at least don't make any grand announcement that we are going to take some majjjor steps. Just announce in a business as usual manner. Without the pressure of expectation built in, markets might take to them in a kinder fasion.

That said, in the blue corner, headlines declare that analysts' consensus estimate is that the Rupee will fall to 60. (This time I'm tempted to join them. That would complete a bear picture.) But you know what the usually means, correct?

Depreciating Cs

Well, the two Cs are depreciating. In the middle of simmering fuel prices, Crude oil has depreciated by about 17% in the last one year. Indians should have rightfully expected some relief from higher fuel prices. But our Currency decided to play spoilsport. Indian Rupee fell by a staggering 27% during the same period, wiping away crude price gains and further burning holes in our pockets.

The RBI announcement last week to remain hawkish further spooked the markets sending the Rupee closer to the retirement age in government jobs. A few more jabs, and it will touch 58 to the US Dollar. RBIs hawkishness, twin deficits, high inflation, and a frozen government are all things that we are used to by now.

What surprised me though was what RBI deputy governor Mr. KC Chakraborty said when asked whether falling crude will help arrest inflation:  "The fall in crude prices has been partly offset by depreciation of Rupee. In rupee terms, oil prices have not gone down much". Thank you very much Mr. KC. There you go - a text book answer. He should have been in a classroom. And while he was at it, he could have sidestepped the question about how hawkishness in some way contributes to the falling currency.

He also went on to make a case for people who save - and how low interest rates in a high inflation environment could hurt those who save money. I'm not going to say anything about that, because I don't have anything left to save after paying my bills. All I can say is that we need more doves than hawks in RBI now. So sing with me, Kabootar ja ja ja ....