Signs of an impending threat to India’s fiscal stability were evident this week when the rupee tumbled below 69 to the US dollar for the first time ever.
While the Indian currency recovered a tad, analysts and market watchers say it could breach the 70-mark in the next few days if oil prices keep rising.
As a VCCircle analysis pointed out, prolonged weakness for the rupee could send the government’s fiscal math for a toss ahead of the 2019 general elections. As a result, Narendra Modi and his cabinet colleagues may be forced to take some unpopular decisions that could cost it politically.
Oil prices have been a key factor in the depreciation of the rupee, going up ever since the US asked importers such as India to stop buying crude from Iran after November or risk facing sanctions by the Donald Trump regime.
Nikki Haley, the US ambassador to the United Nations, reiterated this demand during her visit to New Delhi this week. And, if media reports are to be believed, India could fall in line and halt imports of oil from Iran.
In fact, India-US relations appear to have hit a new low with Washington pulling out of the so-called 2+2 dialogue with New Delhi. Scheduling conflicts may have been at play, but the move is being seen as an open snub to India as the two countries are engaged in multiple trade disputes at the World Trade Organization (WTO).
Meanwhile, Indian e-commerce major Flipkart has a key role to play in the rivalry between its American parent, retail giant Walmart, and another US behemoth in Amazon.
A report in Mint on Friday stated that post the acquisition of Flipkart, Walmart is now building an anti-Amazon alliance which would also take on Chinese e-commerce major Alibaba.
According to the report, not only is Walmart hoping to cement this alliance by retaining Microsoft and Alibaba’s rival Tencent as minority shareholders in Flipkart, but it is also looking to rope in Google as a new investor in the e-commerce firm.
Even as that battle continues to heat up, the monsoon seems to be picking up again after a lull as it moved into north India ahead of schedule.
Staying with the weather, a World Bank report has said that climate change will adversely impact living standards of nearly half the country’s population by 2050, denting the country’s growth by 2.8%. This dip in growth will cost the Indian economy as much as $1.1 trillion, the World Bank estimates.
But cutting back to the present, wealthy Indians seem to be rolling in untaxed wealth, despite the government’s efforts to bring them into the tax net. The latest data released by the Swiss National Bank shows that after a three-year decline, money parked by Indians in Swiss banks was up 50% to around Rs 7,000 crore in 2017.
This revelation comes just months after India and Switzerland put in place a mechanism to exchange information on depositors to help curb the menace of black money, which was a big election issue in India in 2014, and also the trigger for the Modi government’s decision to abruptly devalue 86% of the currency in circulation in November 2016.