Since beginning of 2018, rupee is falling consistently and is in search of bottom. By end of August, it touched 71 per US Dollar. India is net importer and hence currency depreciation will have negative socio-economic consequences, may be political too!
Let us discuss one by one. Economic consequences are obvious. As a net importer, the country will have to pay relatively fat bill, more currency out flow will result into increased fiscal deficit. Fiscal deficit will have negative impact on government welfare and other projects. The cost will increase, shortage of fund will lead to delayed execution and cascading incremental cost. Loss of jobs and inflation will lead to less saving, consequently less investment. Central bank have to increase interest rate to promote saving, higher financing cost for business and thin bottom line.
Some one made a statement that even dollar touch to 80 rupee, no need to worry. It seems, this is anticipation that the depreciation will continue. The statement is to caution public that be ready to pay 80 rupees per dollar. This anticipation is based on sound future events. After 5th November 2018, US sanctions on Iran will prevent import of oil against rupee or domestic goods and the exchequer has to pay dollar. Mid-term poll in US, its outcome and possible interest rate hike by US central bank have bearing on dollar demand.
Already higher unemployment in India will add numbers of unemployed to eat up 8.2 percent growth. Increased gini index, inequality, inflation and unemployment may have higher crime rates like return of check issued for future payment, default in loan, theft and street fighting. Change of 2014 regime was impacted by several adversaries, one of them was falling rupee. 2019 may not be different if rupee continue to fall.
There is no short term solution or remedies to protect the economy. Long term solution lies in the fact that government should find ways to decrease oil import bill and increase export revenue. There is no short cut and there can not short cut. The sound path can not be carved out by political slogans and popular rhetoric. Only economist and ground level leaders can find the solution. Leaders imposed from high-command and leaders grown in airconditioned chambers can not find solution. To be effective, one has to go and study in Harvard. One has to do hard work. One has to understand nitty-gritty of Indian economics. Harvard does not teach Indian economics. It give you sound knowledge of principles. You have apply principles as it fits to local socio-economic factors. One size does not fit all. What is true for USA or Europe or Japan or Israel may not be true for India. To understand the ground level current, you have to go and feel that current. By addressing election rallies and attracting people to clap rhetoric can not resolve the problem that country is facing.
BTW, the most affected people due to rupee depreciation is bottom of pyramid, 70-80% population at bottom! No economist will support the statement that falling rupee is not a matter of worry. They will laugh at it!!