HIGH INFLATION, NO IMPACT ON DOLLAR!

From  Rs 4.76 per dollar in 1947, Indian rupee fell to an altime low of Rs 93.81 as on this  date. However, when USA was facing a severe inflation sometime back, may be one of the harsh one of the recent times, it could make no dents on the US Dollar. It seems that exchange rates are arrived at by some mythical terms of calculation. I think it is near impossible to give a satisfactory explanation to this strange state of international exchange rates. Due to  this inflation, per capita strain on US economy was much higher than India's per capita strain. However during the inflation period the US$ stood as strong as ever but the Indian rupee had severe dent. This economic theory is beyond the concept of modern economics. May the economic priests sit together and arrive at a universally acceptable formula for international monetary exchange.

The existing system of exchange rates is not managed by any universal theory. Currently the rates are managed by some countries according to their preference. If Indian rupee falls in exchange with US Dollar, it instantly make impacts on our purchase of oil. That should not happen. Oil price should be as per the deal between India and that country. USD should have no role to play in this and also with other trading  countries. USA is dictating the exchange rates with other countries based on dollar. We may  explain it in a better way. Supposing a used car is available in USA for $20,000. Now we have to pay Rs 18.76 lakhs at current exchange rate of Rs 93.81 per dollar. Suppose the exchange rate becomes Rs2 per dollar, the same car will be available for us for Rs 33,200. In both cases used car owner in USA gets $20,000. If this is a quick turn of event, can we get petrol at a cheaper rate. Then they may amend the pricing system. What is suggested here that we may find ways and means to fix the exchange rate country wise on rupee value on rupee and currency of the relevant country, not on dollar.

If we can take the lead in establishing this new method of exchange rate, our rupee will be strengthened fast as the currency of other countries. And the present practice of changing the rate time and again in a day will be ceased. A rate may remain for a longer time.

K V George