CURRENT METHODS OF EXCHANGE RATES CONSTITUTION NEED TO BE CHANGED

We may find below the exchange rate of Indian Rupee with US Dollar from 1950 to this day.

Year                    Rupees per

                            US$

1950                   4.76

1960                   4.76

1970                   7.50

1980                   7.86

1990                 17.50

2000                 44.94

2010                 45.73

2020                 71.29

09.07.22          79.29

Important factors those determine the currency exchange rates are given below.

1. Inflation

2. Interest rate

3. Public debt

4. Political stability

5. Economic growth

6. Balance of trade

7. Current a/c deficit

8. Confidence/Speculation

Among the above factors, only S.no 2,3,6 and 7 only are firm and can be verified with supporting documents. Rest are relative terms which can be defined on either way depending upon the outlook of the authority determines the final rate of exchange. It can be asserted by anyone who take a close look of the exchange rate of Indian Rupee vs US$ that over the past 70 years Indian economy never had a positive growth and US economy never had a negative growth. It can also be found that other prime countries who are engaged in trade with India gaining on Indian rupees with no effort of theirs.

This method of evaluation of exchange rates should be stopped forth with by removing some factors of consideration which are not verifiable with figures including the speculative ones. While considering debts of a country, only bad debts need to be focused for determining exchange rates. It is also essential that both positive and negative growth of GDP should be brought into consideration for fixing the exchange rates between two countries. There must be a 24×7 evaluation by a world forum, preferably a short term one consisting of top twenty economy of the world.

Initially, to shape it up, India should take a lead role.

K V George