By now, everyone knows that the rupee is dropping because first, petroleum and gold imports have made our current account deficit (CAD) huge and second, the US Fed has threatened to turn off the money tap which was funding this deficit so far.
For weeks now, the government has been threatening to curb the imports of ‘inessential items’, and perhaps, it will actually do so soon. This will at least reveal to the rest of us what the powers that be consider to be inessential.
All of us who are above the age of about 40 remember having grown up in horror of ‘inessential items’ which, along with their evil twin, ‘luxury goods’, were the stuff of our economic nightmares till the early 90s. Those days are back.
If only it were so simple. Over the last few weeks, I’ve had my own micro-level first-hand experience of where all the CAD is coming from. We are moving into a new office in Delhi and a contractor has been building up the interiors.
Nothing fancy, just reasonably priced material and inputs of reasonable quality is being used, all of it chosen by the professionals who are responsible for getting the work done. Last week, while looking over the work, I realised that almost all the material used was imported.
It’s just that even with the rupee around 60 to a dollar (as it was when most of the purchases were made), the reasonably priced good quality stuff all turned out be foreign-made!
Digging a little deeper into this with the contractor, I was told that for some of the inputs that he uses there are no India-made options any more. They used to be there till a couple of years back but it’ll be much harder to resurrect the Indian manufacturing that has died.