
At its simplest, currency acts as a medium of exchange. However, when one currency, like the USD, becomes the primary medium for global trade, it also behaves as a commodity. For india, many essential imports, such as crude oil and electronics, are priced in USD. To purchase these imports, indian buyers need USD, which they obtain by exchanging INR. If the demand for USD increases (due to higher imports) while the demand for INR remains stagnant or declines, the value of the Rupee weakens. This imbalance becomes pronounced when india imports significantly more than it exports, as the outflow of INR to acquire USD outpaces the inflow of foreign currency earned through exports.
Recent trade data from India's Ministry of Commerce highlights the severity of this imbalance. In november 2024, india recorded its largest merchandise trade deficit on record at $37.8 billion. Imports surged by 27% annually to $69.95 billion, driven by rising costs and demand for essential goods. In contrast, exports fell by 5.3% to $32 billion, the lowest in two years. This widening trade deficit reflects an economy struggling to maintain a competitive export sector while grappling with an insatiable appetite for imports.
A sustained trade imbalance erodes foreign exchange reserves, pressures the Rupee further, and amplifies inflation as imports become costlier. Addressing these challenges requires boosting exports, diversifying import dependencies, and implementing policies that strengthen India's economic fundamentals to stabilize the currency and restore market confidence. As you can see the comments section, netizens feel Modi is busy with Hindu politics and doesn't bother about the crumbling indian Economy.