#MakeinIndia v/s US Dollar$$

Change is the only constant, or is constant the only variable?
Economies want to grow, constantly, consistently and consequentially. India has been on the global watch list for the change that it is trying to bring. Being a superpower, a developed nation, a consistent economy, ambitions at large. The new government at the helm, headed by Mr. Narendra Modi seems determined in that direction, and it is not that the previous governments did not want that all, but a new government is akin to a new job, full on enthusiasm and bliss.

The most interesting and promoted event by the Modi Government has been the #MakeinIndia campaign, which urges the global and local businesses to manufacture locally. The campaign has been the center-stage of the Prime Minister’s international visits, urging businesses to invest and manufacture in India and returning home with Billions of Dollars worth of promises.

This article intends to evaluate the #MakeinIndia campaign and its relationship to US Dollar.

Disclaimer- Not an Economist, nor am i qualified to justify my thoughts, I just write what I feel. Might be erroneous here and there, but then no thought ever developed without errors at the first time.

Historical Price of USD vs INR


  1. Over the last 5 years, USD has traveled from INR 45/- to INR 65/-
  2. USD has traditionally been volatile during 1 full year, with +/- 10 INR variation.
  3. Since the Modi Government has come into play, it has been consistent in its price range, +/- 3 INR.
  4. The price range since Modi government has come in has been above INR 60/-.
These facts are purely based on the graph above. Although traditionally USD/ Exchange rates are determined by various factors like currency reserve in a particular economy, oil prices etc. But the political and diplomatic variations in currency rates are unspoken of. China has long been accused of devaluating its currency to bump up the revenue it generates from USD. So on and so forth.


Coming back to USD Vs #MakeinIndia evaluation. It is by now no hidden truth that Mr. Modi’s government is fast moving towards making India a manufacturing/industrial hub. By and large, the most visible efforts by the government have been in that direction. Even the controversial Land Acquisition bill intends to do that.

  1. The questions one needs to ask is that how does this relate to Dollar?
  2. What makes the Dollar so stable, and lets say expensive?
  3. If our economy is doing so well, should we not be moving towards equalization vs dollar?

Answer 1.
This is where according to me the #MakeinIndia campaign comes into picture. As much as the success of this campaign depends on global companies localizing in India, it also depends on making imports expensive. Expensive imports directly result in local manufacture.
Take for example- In 2013, you would have paid INR 5000 for 100 USD, and today you would end up paying INR 6500. Businesses traditionally have operated on 20% gross margin, and expensive imports result in only 2 things- Either increase the end consumer price, or play at a relatively lower margin. The choice, you curb your imports and manufacture locally.

Although essential imports do tend to increase inflation in such scenarios, but inflation is more locally driven and less on imports.

Answer 2.
So why is the Dollar in a stable price range. Common sense can answer this. A fluctuating commodity brings punters to play, where you play on the variation. The longer you keep it stable, the longer is the virtual impact of the commodity, and you start correlating with it in that price range. Considering that Dollar has been in this range for over a year now, would you wait for another 2 years for it to come under Rs50 and do your business. You would either burn your fingers at this price, or look for alternatives. When we say alternative, we mean #MakeinIndia.

Answer 3.
Considering we as an economy are doing well is a myth. We still have over 50% of our population living under poverty. Apart from some metros, most of India till date has poor infrastructure. Growing at 7–8% GDP does not qualify a country as moving towards development. That is the bare minimum we need to feed our ever growing population. This is where i disagree with our Ex President, (The finest scientist India has seen) Dr. APJ Abdul Kalam and his vision 2020. We are far from being a developed nation, not 5, not 10 but at least 30–40 years. Hence dollar equalization, or lets say even getting half way down towards equalization is not an option for India.

So will the Dollar Increase? Decrease? or what?

In a nutshell, dollar should remain in the current price range for a considerable amount of time. The bookish factors like Oil, Currency reserves etc might bring in slight variations every now and then, but they would not be drastic. The political and diplomatic variations would still control it largely, and the political capital at the center seems to be working in making #MakeinIndia a success.