The rupee’s crash

THE spiral of inflation and devaluation the country is caught up in did not begin a few months ago. It began in 2021. The rupee had fluctuated in a band between 150 and 155 to the dollar since the middle of 2019. In May 2021, it was hit by the first bout of volatility that has not abated since then, despite the value of the dollar having doubled. It took more than 10 years for the dollar to double in value from 2008 onwards. It took slightly more than two years for it to double since 2021, and it still has not found its moorings. Inflation (as measured by growth in the national Consumer Price Index) began its ascent in October 2021, and has continued unabated since then, despite finding a brief and volatile plateau in the second half of 2022. The year-on-year CPI growth rate was 9.2 per cent at the start of this journey in October 2021. It skyrocketed to more than 27pc by July 2022 before hitting a peak of 38pc in May 2023. It has come off the peak since then, but does not look like it will subside any time soon, given the fuel and energy price hikes, the continuing devaluation of the rupee, and possible sharp hikes in gas tariffs.