How India got screwed by U.S for the fall of rupee

[Kiss_of_the_Dragon]

Americans once again shown to the world that they're master of economy and know how to manipulate and out manoever any potential economic competitors: they have done to Japanese in 1985 with plazza accord that has frozen Japanese economy, China was supposed to the next target for economical regime changed but try to bully their banker is not a good idea so the next victim happened to be India. Intentionally or unintentionally, U.S has cause big trouble for Indian's rupee depreciation.

I don't know if anyone agree with me that U.S is responsible for rupee fall, let discuss, according to this article, it seems that U.S is the perpetrator. I'm wondering what is the overhal economic damage to India.

PM seeks orderly exit of US policy - Hindustan Times

Prime Minister Manmohan Singh on Wednesday called for an "orderly exit" of the easy loan policy in the US to soften the blow to emerging markets.



"Though there are encouraging signs of growth in industrialised countries, there is also a slowdown in emerging economies, which are facing the adverse impact of significant capital outflows," Singh said in a statement before his departure for Thursday’s G20 summit in Russia.

"I will emphasise in St Petersburg the need for an orderly exit from the unconventional monetary policies being pursued by the developed world for the last few years, so as to avoid damaging the growth prospects of the developing world."


The imminent scaleback of an easy loan policy in the US to claw back from its crisis of 2008 is the biggest factor hurting emerging market currencies.

A widening current account deficit (CAD) — the difference between dollar outflows and inflows — have compounded India’s problems

The rupee’s value has crashed by nearly 20% since May after US Federal Reserve chief Ben Bernanke hinted about a possible rollback of the monetary stimulus that involved injecting upto $85 billion every month to aid a sustained recovery in the world’s largest economy.

Emerging economies such as India have been receiving large slices of these ultra-cheap money boosting equity and currency markets. The tide has since turned with funds flocking back to locations safer home in the US.

Since June 1 - after the US Fed signalled a tapering of its stimulus - overseas funds have pulled out nearly $12 billion from India’s stock and debt markets.

India’s economic growth crashed to 4.4% during April-June - the lowest in four years - hit by a crippling industrial slowdown.

Singh said he will once again emphasise at the summit that the G20 should ensure primacy of the development dimension in his deliberation, focus on job creation, promote investment in infrastructure as the means of stimulating global growth and create potential in developing countries to sustain higher growth in the medium term.

 

[Raphael]

It just goes to show that while India may have been politically decolonized, it has never been culturally and mentally decolonized (check out all those skin-whitening creams), nor economically decolonized, as it is at the complete mercy of its economic master.

And in the not-so-distant future, when it has to get on its knees and clasp its hands in prayer in front of the IMF for a loan, it will be financially re-colonized. And all because the country has an air of absolute indifference towards independence, self-sufficiency, and dignity.

 

[Kiss_of_the_Dragon]

^^ I'm not economist but it seems to me that U.S has pulled the plug on India's economy.

 

[Coltsfan]

^^ I'm not economist but it seems to me that U.S has pulled the plug on India's economy.

What would be US motive behind "pulling the plug" on India's economy?

I know you're not an economist, so feel free to speculate!

 

[American_Millenium]

India has never been a serious threat to our interests. Why would we want to destroy India?

 

[Menace2Society]

Did the same to the Japanese.

Pakistanis have tried to explain to the Indians that they must build trust and trade with all their neighbours and build an economic bubble on our own so other countries can't just "pull the plug" on an economy.

This is a sign for India to come forward genuinely, make peace and accept coexistence then Pakistan, China, India, Iran and Afghanistan can make a strong bloc, self reliant yet each one completely independent.

Doesn't that sound so much better?

 

[Raphael]

The US has no motive behind it. It's just that when they formulate policy, they only take into account their own interests (there's nothing wrong with this), even though US monetary policy has a huge influence on the rest of the world, and in particular, its captive markets like India.

Right now, the US economy is at tenuous recovery stage, so they are looking at tightening monetary policy and tapering down 'quantitative easing'. As a result, there has been significant investor demand for the greenback, and correspondingly, a plunge in the value of vulnerable currencies with junk ratings, like the Rupee, or Indonesian Rupiah.

 

[Anubis]

India has never been a serious threat to our interests. Why would we want to destroy India?

Probably the US is trying to nip it in the bud before in turns into a threat to US interest

 

[Kiss_of_the_Dragon]

What would be US motive behind "pulling the plug" on India's economy?

I know you're not an economist, so feel free to speculate!

My pure speculation is about Geostrategic such request base at Trivandrum in India or comply and align to U.S foreign policy like Japan. You refuse than you face the consequence.

 

[Coltsfan]

The US has no motive behind it. It's just that when they formulate policy, they only take into account their own interests (there's nothing wrong with this), even though US monetary policy has a huge influence on the rest of the world, and in particular, its captive markets like India.

Right now, the US economy is at tenuous recovery stage, so they are looking at tightening monetary policy and tapering down 'quantitative easing'. As a result, there has been significant investor demand for the greenback, and correspondingly, a plunge in the value of vulnerable currencies with junk ratings, like the Rupee, or Indonesian Rupiah.

So in other words, the devaluation of Rupee v/s $ is an unintended consequence of the QE. That is very different than "US is out to screw Indian economy" theory!

My pure speculation is about Geostrategic such request base at Trivandrum in India or comply and align to U.S foreign policy like Japan. You refuse than you face the consequence.

Raphael is coming up with better logical explanation! Your explanations are bordering on paranoia.

 

[Coltsfan]

Probably the US is trying to nip it in the bud before in turns into a threat to US interest

Nip what in the bud?

India is not even a regional power, let alone challenge US in any foreseeable future!

 

[Raphael]

Can you really say it's unintended? High-ranking policy-makers obviously saw foresaw it, they take into account all ramifications. They simply didn't care because its outside the US. If this is merely a spillover effect, imagine what damage they could wreak if they purposefully set out to wreck the Indian economy.

 

[Kiss_of_the_Dragon]

So in other words, the devaluation of Rupee v/s $ is an unintended consequence of the QE. That is very different than "US is out to screw Indian economy" theory!

Raphael is coming up with better logical explanation! Your explanations are bordering on paranoia.

Indeed @Raphael provided a better explaination, what I see is through the geopolitcal angle, what American did to Japan can happen to anyone include China in order to retain #1 rank as economical power, Intentinal or Untintentional the damage is done to India.

 

[Coltsfan]

Can you really say it's unintended? High-ranking policy-makers obviously saw foresaw it, they take into account all ramifications. They simply didn't care because its outside the US. If this is merely a spillover effect, imagine what damage they could wreak if they purposefully set out to wreck the Indian economy.

Of course they shouldn't care! What is so surprising in that?

If US wanted to wreck Indian economy, all they have to do is buy Indian politicians, they're doing a great job of running economy to ground anyways!

 

[Chinese-Dragon]

The US Federal reserve "hinted" that they may stop their easy-money policy in the next few months.

Right afterwards, the Rupee collapsed.

It's not rocket science. The hint from the Federal reserve led to FDI being pulled out of the developing world and back into the USA.

Who suffers? The countries that are reliant on foreign inflows to finance their current account deficits. India was the biggest loser, simply because India has by far the largest current account deficit and fiscal deficit in the developing world.