Economists, market analysts, planners and administrators have their own theories, explanations and remedies for the rupee crisis. But one only has to recall the famous words of Sherlock Holmes: “It is simple, my dear Watson!”
The continuous fall of the rupee, despite brave statements and declarations by the country’s central bank and the administrators, is mainly due to the demand-supply gap. It is somewhat akin to what happens to onions and tomatoes seasonally. Historically, the currency markets in India lacked depth and volumes. In addition, currently, the market sentiment, which impacts the market at all times, has weakened beyond a point. There is no denying the fact that economic fundamentals and policies would determine the value of a country’s currency. But this is valid only in the long run.
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