Structural changes to arrest the Rupee’s slide:
Usman Khan 51C Indian Institute of Foreign Trade, Delhi September, 2013

I would like to put forth the following arguments as structural changes that could help in arresting the rupee’s slide:  The major cause for concern which has affected the rupee’s slide in the past few months has been the fiscal deficit that the country has been faced with, and it must immediately find alternatives to finance the current account deficit. The government has announced plans to of doubling the gas prices it will pay to the producers effective April 2014. The twofold objectives of this proposal are: 1) To incentivise investment in exploration and production. 2) To minimize outflow of foreign exchange due to import of expensive liquefied natural gas.   Both of the above mentioned reasons are driven by the concerns about the current account deficit, which was 5% of GDP in the year ended March 2013. A major reason of it is the huge imports of oil and gold. However just reducing consumption of such items will not help in solving the problem completely. Import duty on gold has been quadrupled over the past few years but that has had very little impact on curbing the domestic demand for gold. Apart from oil and gold, we must focus on other significant items that contribute to the widening fiscal deficit, and these factors are equally structural and policy induced. Firstly, India has the third largest coal reserves in the world and yet it imported 135 million tonnes in 2012-13. Secondly, even though we are substantially an agrarian economy (15% of GDP and 50% employment in agricultural sector), yet 1/3 of the annual consumption of fertilisers is imported. Also, as the farmers pay subsidised price, it costs the exchequer Rs.1 Trillion annually in subsidies. Nothing has been done over the past 2 decades to build India’s production