Excerpted economics doesn’t work

“Even if the rupee falls to 80, it will not be a concern, providing all other currencies depreciate”, our Economic Affairs Secretary was quoted as saying, earlier this week, on the front page of the Mint.

The logic is pure Alice in Wonderland – if all other currencies depreciate, then what exactly does the rupee depreciate against? One commentator explained – “he’s transposing the dollar against the rest of the world”. She was probably right. And maybe the honorable secretary had mentioned that elsewhere. If so, then the Mint editors took the quote out of context.

This morning, the Vice Chairman of Niti Ayog, Rajiv Kumar, was quoted, in the same paper, as saying,

“The rupee rose by about 17% during the last three years. Since the beginning of this year, rupee has declined 9.8%. So it has recovered. It is coming back to natural value”.

This is a staggering statement, for many reasons:

  1. The math – if something rises 17%, then drops 10%, it ends up 5% higher. But the rupee is at it’s lowest against the dollar. If the dollar is the benchmark here – which it typically is, this defies logic.
  2. If the rupee has declined, how exactly has it ‘recovered’? Recovery usually suggests rising, not falling.
  3. What is the ‘natural value’ of a currency?

Again, in response to my tweets, a  commentator tried to add context – namely that Mr. Kumar was talking in the context of REER (Real Effective Exchange Rate). That may well be the case, but even read like that, it makes the math illogical. And it definitely puts the Mint editors in the dock, again, for printing an excerpt out of context.

Careless comments typically appear when people are in a hurry. Why are our senior-most economic bureaucrats in a hurry? It doesn’t behove the custodians of a large rapidly growing economy. And it certainly doesn’t behove the custodians of a responsible newspaper, to rush half-baked statements to press.


Mohit Satyanand

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