An Open Letter to Mr. Raghuram Rajan, RBI Governor

Dear Mr. Raghuram Rajan,

I know you were under great pressure from Industry & Government to reduce Interest rates & you gave a surprise today to one & all by reducing 50 basis point Repo rate cut. Though it is good to think of Indian Industry but remember that still 80% of Indian people are those who put their savings in Banks & Post offices to earn something from their savings. All those 80% people of India don’t like your generosity to reduce Repo rate so blatantly. You must know that now most of the poor, middle class people & retired people of India shall earn 0.5% less on their savings.

It’s good to think about Indian industry but it is equally important to think about 80% Indian population who earn some good interest from their savings. Stock market shall always feel great that Interest rates come to near Zero level, like it was for 7 years in America. Mr. Rajan, do you know that American people are frustrated with the interest that they get on their savings. They hardly get 0.25 – 0.3 % on their savings. Do you want to make India another America where people hardly earn anything from their savings. So Mr. Rajan, I have no ill will towards you, you are doing a great job, but don’t come under pressure of Indian Industry & Indian Government to reduce rates so blatantly.

Dear Mr. Rajan, you have reduced Repo rates by 125 basis points in one year, which means, Indian people who save. shall earn that much less interest on their savings. So hope you shall be Very Cautious Next Time & think of 80% of Indian population who earn some what interest from their savings & live their lives in a happy manner. Don’t make their lives worse.

Regards,
Sanjay Chopra

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Why Indian Rupee will slide down to Rs. 100 vs 1 US $

Sri Lanka’s capital city Colombo is it’s largest city. In Colombo, you can find all the Foreign Cars moving, all the imported goods & all things Foreign that can be found all over the world. In simple terms, most of the things that a person considers a luxury is imported from other countries. Result is that Sri Lankan Rupee quotes against 1 US$ to Rs. 132 nowadays. Same is the case with Pakistan & the Pakistani Rupee quotes as 1 US$ to Rs. 102. Reason being exports are much less while imports are much more.

Same problem is with India now that its exports are getting much less while imports are increasing day by day. India’s “Current Account Deficit” (CAD), the difference of exports & imports is increasing day by day. India’s main Foreign exchange source is not permanent but temporary & that Global players / investors are putting temporary money (dollars) in Indian markets (share markets & other money markets) which they borrow cheaply from other world markets where interest rates are very low. This temporary money goes out in the same way as it comes as world markets change very rapidly as per changing world market conditions. This flow out of dollars from India in future shall put lot of pressure on Indian Rupee & it shall depreciate further & also very fast as Indian Government is not having any concrete plans to stop it’s depreciation.

India’s population is so much that in the coming years, more & more younger class shall be having their own family. This younger class shall be using more & more imported goods from China, Europe, USA etc. countries, which shall increase imports like anything. This shall increase the Current Account Deficit (CAD) badly, which shall lead to depreciation of Indian Rupee very fast. Also many Indian companies are having huge debt in dollars terms & it’s payment shall also put lot of pressure on the depreciation of Indian Rupee. 

Indian Government / Reserve Bank of India (RBI) is also a great buyer of US $ / dollars to increase it’s foreign exchange reserves & it shall also put lot of pressure on Indian Rupee which shall lead to depreciation of Indian Rupee. As Indian Government is not having any concrete policies / plans by which Indian exports can be increased substantially & can contain the rising Current Account Deficit (CAD), so all of the above said factors shall lead Indian Rupee to slide down to Rs. 100 vs 1 US $ in next coming years. Indian currency shall soon be on the path of Sri Lankan Rupee & Pakistani Rupee, which are quoting above Rs. 100 vs 1 US $.

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