Wisecracks on the currency
4 min read 10 Oct 2013, 01:00 PM ISTIf the general public’s understanding of the rupee is devoid of nuances for a good reason, the official response is thoroughly appalling
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The reversal of the rupee’s depreciation is disheartening. No, I did not mean just for software companies or the non-deliverable forward market participants. What will happen to the civil society-funded cottage industry of jokes on the currency’s fall? We have seen or heard many of them, starting from actor Kabir Bedi likening the rupee to his age (“senior citizen"), down to the more recent one which says that the rupee does not “appreciate" these comments.
World Bank chief economist Kaushik Basu recently remarked, in a different context, that the growth versus redistribution debate encourages so much public participation because it makes very little demand on the intellect. This may be an academician’s condescension, bordering on disdain, for the less well-informed, but it’s true and can be extended to the public perception of the exchange rate as well. Few realize how shocking it is to conflate a depreciating rupee with loss of national prestige. There was mindless triumphalism and no jibes at the ridiculous appreciation of the rupee in 2007—fundamentally a bigger joke than the present depreciation.
That line of thinking also partly smacks of elitism—arising out of despair over rising costs of foreign travel and education. The bleeding hearts on imported inflation as a result of the rupee’s depreciation should have been rudely awakened by the fact that onions have been a far more significant contributor to inflation than all imported inflation put together. These jokes also play into critics’ impression of a floundering government, and are thus self-serving.
However, I do take it positively and have sympathies with the manufacturers of the jokes. It is good news that the subject itself has gained widespread currency, no pun intended. Do we remember another episode of drawing room discussion fuelled by a depreciating rupee, of which we have seen several bouts before? When common people have not been properly educated on any issue, they will learn by experimentation and chaotic argument, and this is exactly what has been happening.
It is deplorable for a nation like India to have such poor levels of financial literacy. This is the country that gave the world the first book on economics, has the largest religion dedicating a god to wealth and prosperity, and even calls a moneylender a mahajan (great man). Up until a few years ago, school students weren’t taught how to look at a bank account statement, but had to learn Shakespeare, DeMorgan’s laws, Bolshevik revolution, Faraday’s principle, and contour maps. And for some time much later in life, financial literacy was left to hucksters parading themselves as advisors.
A close relative of mine, who has been working as a software engineer for five years, had ₹ 6 lakh lying in her savings account because she thought that there was nothing to be gained by way of interest by shifting a part to a fixed deposit (call it an extreme lack of awareness, but that’s the point).
We can trace all this to Nehru’s brahmanical contempt for money, eventually resulting in the nanny state arrogating to itself all matters monetary, leaving nothing that individuals needed to be educated on. In the first flush of liberalization, some of which still continues, the financial sector lapped up the opportunity to unleash a torrent of products just to counter the repression prevailing hitherto. There was little incentive to educate the public unless compelled.
As a consequence, serious matters have got into the realm of public discourse, the unbridled nature of which is singularly unhelpful. You do not have too many people pontificating on the Higgs Boson, but everybody and their uncle has something supposedly erudite to say about credit quality, bank licences, and now the exchange rate.
But if the general public’s understanding is devoid of nuances for a good reason, the official response is thoroughly appalling. Since politicians, and to some extent regulators, have to pander to popular sentiment rather than reason, they too go around “alleviating concerns" on a falling rupee, and consider every untoward movement a conspiracy or speculation.
Even more frightening is the degeneration of these responses to a point wherein the true value of the rupee is being projected as 57-58 by a government official. This is both retrograde and irresponsible, coming not from a two-bit journalist but a person in a position of authority and credibility. But for this panic, it is also doubtful whether the Reserve Bank of India would institute countless measures to stem the fall, one after another, and compound the confusion.
Little knowledge is not a dangerous thing; it is the beachhead for more knowledge. It should be taken constructively. It becomes dangerous only if we do not realize that it is little.
The author has been a research analyst on financial services as well as other sectors at various investment banks, and is currently an independent consultant focusing on banks and financial services.
