Weak Rupee, Sulking Allies, Costly Petrol: Remember 2013, Anyone?

Are we witnessing an action replay of 2013, again in 2018, at least in terms of often buried but powerful headlines?

Other than very unfortunate reports of mob lynching at regular intervals from all across the country, we are faced with regular doses of news like a weak rupee, an unusual spike in crude prices resulting in costlier domestic fuel, sulking allies of the Bharatiya Janata Party (BJP) and by-election losses for the ruling coalition.

Are we witnessing an action replay of 2013 all over again in 2018, at least in terms of the often buried but powerful headlines?

Rupee’s Free Fall, Hitting All-Time Low

Take the rupee’s free fall in recent months, for instance. Having already fallen nearly 8 percent in the last six months alone, breaching the psychologically important 69 rupees to a dollar mark, there seems to be no respite in sight. If we dig deep, the picture looks quite grim.

India’s non-oil, non-gold trade deficit, which stood at less than $1 billion in 2013-14, crossed $53 billion last financial year, signalling massive spurt in imports. On the exports front, we have failed to cross the $314 billion mark attained in 2013-14 in all subsequent years.

The best we have had is a figure of $310 billion achieved in 2014-15. The twin data speak eloquently about the competitiveness (rather, the lack of it) of our manufacturing sector despite the much-hyped ‘Make in India’.

The only saving grace for hitherto manageable trade deficit (excess of imports over exports) was massive drop in crude oil prices which together with gold constitute bulk of our imports. Now that crude oil prices have started inching up, our trade deficit has begun to go haywire, putting pressure on the value of rupee vis-à-vis dollar.

While the slide in rupee in 2013 was seen as calamitous and symptomatic of a weakening economy, with a ‘weak’ prime minister at the helm, the current spell of rupee depreciation has been conspicuous with its absence in media debate. The Indian currency incidentally has been the worst performer among all its Asian peers this year and experts warn us that the fall is going to accentuate even further.

There is no denying that rupee depreciation contributes to economic woes as it pushes our import bill, resulting in costlier fuel, gold and all other imported items. It is bad for general price trend too as the current spell of an 8 percent rupee depreciation is estimated to add at least 1.2 percent to headline inflation.

If we feel like screaming now, who should we blame? The ‘Make in India’ jumla (slogan) which it indeed has been? The oil cartel called OPEC that has conspired (there are messages to that effect circulating on social media) to keep the crude oil prices inflated? Or weak economic management that did nothing while exports continued to languish and never even crossed the level achieved five years ago?

Petrol, Diesel Prices Rocketing

What is going to weigh in on rupee further is the spurt in global crude prices. The crude has been hovering in the range of $80 a barrel and the price of petrol closer to Rs 75 a litre in Delhi. Does this not remind us of what we saw and screamed about in 2013?

The average price of crude in the international market then was close to $95 a barrel and the price of petrol in Delhi at around Rs 70 a litre. Despite more unfavourable global condition as crude oil prices were much higher, we were unsparing then. The current spike in domestic fuel prices, however, has drawn much more charitable response.

While the official line is that prices now are market-linked (let us remember that the decision to put additional excise duty on domestic fuel had nothing to do with the market though) and there is very little that can be done, we have seen days and weeks of temporary price controls, suggesting a policy that is inconsistent and generally uncharitable to the people.

Mainstream media meanwhile continues with its all-is-well shrill as if nothing has happened.

From all-weather allies like the Shiv Sena and the Akali Dal to Nitish Kumar’s Janata Dal (United), the ruling BJP has had an uneasy relationship with all its partners of late. While most of the apparent unease could be a bargaining ploy on the part of allies to get an upper hand in distribution of seats, there is no denying that the BJP-led National Democratic Alliance does not give the impression of a steady ship.

Once again, haven’t we heard this before? Rewind to 2013 when Sharad Pawar-led NCP was flexing its muscle and Karunanidhi-led DMK was sulking because of the alleged involvement of party members in the 2G scam.

DMK top brass would grudgingly complain that their leaders were made scapegoats. The UPA then looked like a divided house about to explode. The Congress itself looked unsure of itself with some top leaders even opting out of the electoral battle ahead.

Is there a message here?

String of Electoral Reverses

There is no denying that the BJP has had a dream run since its spectacular show in the 2014 Lok Sabha, winning state after state. However, the party seems to have been faced with some serious anti-incumbency now, if recent electoral reverses are any indication. The losses in Alwar and Ajmer Lok Sabha constituencies in Rajasthan, Gorakhpur, Phulpur and Kairan in Uttar Pradesh and Bhandara-Gondia in Maharashtra must have punctured the invincibility of the saffron party.

To see losses in key battleground states like Maharashtra, Uttar Pradesh and Rajasthan where the BJP almost swept the poll four years ago is a much bigger headache. More so just few months prior to the big battle of 2019.

Sounds familiar again? The Congress was decimated in almost all elections held in 2013. The defeat was staggering in states where the grand old party was in direct contest with the BJP, giving an indication of what was to come in 2014. Do the recent poll losses of the BJP send out the same signal?

Can we afford to ignore the underlying message behind the recurrence of the same set of headlines after five years?