An aggregate report card of Government of India (2014-2022): a brief commentary

The currency exchange of countries are now entirely entwined with a basket of currencies and their own economic strength. A large population will automatically become a bigger economy and will have an upward trajectory if their population increasingly becomes skilled and make value added products. In the list below I was guided by a map of South Asia. I used gold to yellow colors to show the currencies that exchange rates largely dictated by free market.

The most instructive here is Pakistan Rupee, Bangladesh Taka, Sri Lanka Rupee and Nepal Rupee. Go back 5 and 10 years and you will scratch your head as to why these countries have almost near equal rate to India. Now the rates are getting segregated and differences are becoming clearer.?

If you pay attention to change in rates over 5 and 10 years it will be evident that Maldivian Rufiyaa (MVR) and Afghani exchange rates are not consequence of free trading. If you know economic and political history of the region you will ascribe different reasons and you will be correct. Now why was historically India Rupee was so low compared to its neighbors. That is due to vastly uneven growth and lack of uniformity in skill set. This is the aggregate report card of "Modi government" (Government of India led by Mr. Narendra Modi: 2014-2022). It is the twin effect of infra development and consequential skill set--overall product improvement. This report card is immune from the political effect as best as it gets. If you start evaluating in next 5-10 years another linked parameter will start showing vast relative difference that is GDP. This is implicit in this argument and main driver of this equality towards exchange rate that India Rupee deserved. You cannot have discernable increase in GDP if your products are value added. More improved products made cheaper is enhanced productivity. More attractive and innovative product means more export and build up of Forex cushion. Overall it is that simple. Consequence, look into the GDP and look into the exchange rates against some prominent baskets of international currency and you have it. Which is what I present here is the report card.

I have not included China or Turkmenistan for the same reason or relevance as the sample inclusion of MVR currency. The dominant forces regulating currency exchange rate or comparison exchange baskets of these currencies are forces other than the free market forces alone. This is also what is in contrast to the explanation in the above paragraph. MVR has little change and Renminbi/Yuan has little change in a few years. If you infer based on the Renminbi/Yuan that it does not matter GDP will still show you improvement, which I did not include in the aggregate card. Now GDP and exchange rates should go hand in hand. Lee Iacocca in his Autobiography has a more detailed explanation on this. This is what is telling tale about the tail or the dominant force not being free market forces for exchange rates.

I surely am not a trained economist. For the record I was not fortunate to have a single formal class or course in economics during my formative years or till now. However, I am an avid reader of economics and with internet there is good opportunity to learn, analyze and self-teach. I have been following the exchange rates since 1980s. It has become better since 2000 and increasingly better. I have been following GDP of the region intermittently for 15-20 years. Not systematic but good snapshots. Why Bangladesh and Pakistan currency exchange rates are so similar always bothered me (with respect to US dollar). Exception used to be Japanese Yen. The differences are now glaringly clear.

Take home message, for the folks with the region or care about development or improvement: the class average will not be vastly different if you just have a few superbly below average students: Kalahandi, vast regions of Bihar, vast regions of North east India, many regions of Uttar Pradesh.