Are the votaries of a weak rupee right? The answer: no. A constantly depreciating rupee is a Sword of Damocles over the heads of importers. With crude oil prices rising to over $100 a barrel, India’s trade deficit in 2021-22 is likely to hit record highs.
Weak rupee advocates ignore several facts. First, the most successful export leviathan in history, China, with exports of over $3 trillion a year (equal to India’s entire GDP) has never suffered due to a strong yuan. The Chinese currency has been trading at a steady exchange rate of 6-8 yuan per US dollar between 2006 and 2022.
In 2006, the yuan was trading at 7.97 per dollar. In 2022, it is trading at 6.35 per dollar. Thus in 16 years, the yuan has actually strengthened by around 20 per cent against the US dollar.
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