Sitharaman’s dollar remark seen as admission of the problem without actually accepting it

Finance Minister Nirmala Sitharaman's defense of the rupee's 8 per cent fall against the dollar this year by claiming that the dollar has strengthened has drawn flak from political circles, with memes being created as netizens believe that the government has, for the first time, admitted to a problem without actually saying so.

In response to a question about the rupee's decline, Sitharaman, who is currently in the United States for the annual meetings of the International Monetary Fund (IMF) and the World Bank, said on Saturday, "First of all, I would look at it not as rupee sliding but as dollar strengthening.”

The finance minister said that the dollar is strengthening incessantly, so obviously, all other currencies are performing against the strengthening dollar.

“I am not talking about technicalities but it is a matter-of-fact India's rupee probably has withstood this dollar rate going up...I think the Indian rupee has performed much better than many other emerging market currencies," she was quoted as saying.

Sitharaman claimed that the Reserve Bank of India (RBI) did not intervene in the market to fix the value of the Indian rupee, but rather was concerned with preventing excessive volatility.

The statement made by the Finance Minister however did not go down well with people, and Twitter users responded with bizarre memes.

She was also chastised by Opposition leaders for making such statements.

Congress leader Rahul Gandhi said that the people were paying the price for the government's "incompetence and wrong policies."

He asked, "How long will the RSS-BJP work weaken India by deceiving the public?"

Popular memes that drew laughter on the internet included ones that said, “The aircraft is not crashing, gravity is pulling it down,” and “We didn’t lose the match, the opposite team won.”

Congress spokesperson Supriya Shrinate said only the Finance Minister can explain the meaning of this new theory and alleged that the government's efforts to strengthen the rupee in the last 11 months have not succeeded as foreign investors do not have faith in its policies.

“The rupee is now at the cusp of crossing 83 against 1 USD and it seems Prime Minister Narendra Modi ‘will only stop after it crosses 100’,” she said.

Shrinate noted that because 86 per cent of India's trade is in US dollars, a weakening rupee has an impact on the Indian economy, trade, and imports.

"But the finance minister is unconcerned; she has devised a new theory: a weakening rupee raises prices; the rupee is not weakening; there is no unemployment; there is no price rise; all of this is being said while the people grapple with these issues," Shrinate said.

The Finance Minister has been ridiculed and criticised earlier for her words and deeds, so this is hardly a first. A MP asked Sitharaman if she ate onions when she was testifying in the Lok Sabha in December 2019 about the shortage and rising price of onions, which had reached Rs 100 per kilogram at the time. "I have little to do with onions," the minister replied.

The Opposition had spoken out against Sitharaman's "insensitive" comments and compared her to Marie Antoinette.

Although the RBI has intervened to keep the Indian rupee from falling further against the US dollar, the exchange rate hit a new low on September 26 when it was trading at Rs 81.60.

The Fed's hawkish outlook is one of the major reasons for the currency's decline. The Fed has been raising interest rates in recent months to control inflation. On Monday, the rupee appreciated towards the Rs 82.20 level amid weakness in crude oil prices.

Professor M Govinda Rao, chief economic advisor, Brickwork Ratings, a member of the 14th Finance Commission, and former director of the National Institute of Public Finance and Policy opined that what the minister was perhaps saying was that it's not just the Indian rupee that is sliding but that currencies are sliding in comparison to the dollar the world over.

“The thing is not because the Indian rupee is weak. Things are happening because the dollar is becoming stronger, that's the point. So, in other words, there is a depreciation of currencies all over the world and India is no exception. Other countries are also having this problem and, therefore, the depreciation in India to that extent is much less than elsewhere in the world. Whether it is the British Pound or Euro or the Japanese Yen or Euro many of these countries have, so, the Indian currency has not depreciated against other currencies but depreciated only against the US dollar,” he said.

Rao added that to his mind, Sitharaman was admitting that there was an adverse impact.

“Depreciation reduces the value of a country's currency when compared with the currency of other countries. Currently, depreciation has discouraged imports because imported goods have become more expensive due to a reduction in the value of the currency. It’s like saying a watermelon falls on a knife or a knife is thrust into a watermelon. The result is the same,” he said.