There has been a lot of noise in recent weeks about the external exchange value of the Rupee, which has fallen by nearly 10 percent in the last one month and nearly 20 percent since April 2013. The prices of imported goods have risen and this has had a cascading effect on prices across the spectrum of commodities.
It is to be noted that the working class has been worried about the shrinking purchasing power of the Rupee not just for some weeks or months, but for the past several years at a stretch! In spite of mass discontent with the persistently steep inflation in consumer prices, the Central Government did not respond as long as the big capitalists were pocketing maximum profits. Now the government is all worked up when the steep decline in the Rupee has impacted external transactions and negatively affected capitalist profits in various sectors.
The most immediate cause for the fall of the Rupee in relation to the US Dollar has been the flight of foreign speculative capital - the drastic withdrawal of funds by the biggest foreign banks and financial corporations. These big-time global gamblers had earlier found the Indian stock market an attractive playground for their speculative investments. Now they have pulled out massive amounts of their money in one sweep, to shift them to the US on the expectation of higher rates of return.
Opening all doors to foreign capital, in the name of globalisation through liberalisation and privatisation, has landed India in this situation, where even the Reserve Bank and Ministry of Finance have limited powers to protect the exchange rate of the Rupee.
The fall in the exchange rate of the Rupee has taken place in the context of an economy that has already been hit seriously by the global capitalist crisis. The year 2013 has witnessed a decline in manufacturing and slowing down of exports. The crisis has led to a widening gap between imports and exports, which has added to the pressure on the Rupee.
Whether it is auto or media or IT, the capitalists are shutting down plants and offices and thousands of workers are being laid off. This is further aggravating the crisis, by further reducing the capacity of the toiling majority of people to purchase what the capitalists want to sell.
According to Prime Minister Manmohan Singh, this crisis is the price Indian people must pay to be part of the imperialist system. He told the Parliament that there may be short-term shocks to our economy and we need to face them. That is the reality of a globalised economy, he said, whose benefits we are supposed to have reaped in the last 20 years!
Over the past 20 years, the economy of India expanded by about 4.5 times whereas the wealth of the Tatas, Ambanis, Birlas and other big capitalist houses expanded by 40 times or more, some by even 80 times. At the other pole, millions of workers and peasants have remained poor or become even poorer than before.
Since 1991, the mantra has been to open up the Indian economy to the free flow of commodities and capital. Foreign trade has increased from 15% of domestic production in 1990 to 47% in 2010. As a result, the Indian economy is much more vulnerable now than ever before to the actions of the global big powers and financial monopolies.
The Rupee is now one of the most actively traded currencies. More than half of all the buying and selling of the Rupee takes place outside the country and the Government of India has no control over it. The biggest speculative currency traders are the largest international banks such as the Deutsche Bank and Citibank. Thus, the policy of globalization has fully exposed the working people of our country to the biggest speculators of the world.
As the global crisis of capitalism deepens, the most powerful imperialist states, headed by the US, are doing everything they can to shift the burden of the crisis, not only on the backs of the toiling people at home but also on the weaker and more dependent countries. In the face of this fact, the plea of Prime Minister Manmohan Singh at the G20 that US internal policies should take into consideration their impact on developing economies is a futile one. It is like a householder who leaves all doors open and then begs the thieves not to harm his family!
The Prime Minister and Finance Minister of India are repeatedly assuring the capitalists at home and abroad that in spite of the steep fall in the Rupee, no controls will be imposed on capital flows. They declare that no matter what, there will be no reversal of the drive towards globalisation through liberalisation and privatisation. They have no hesitation in passing on the increasing costs of imported fuel, medicines and other essential goods on to the backs of the people.
The bourgeoisie has shown clearly that it is incapable of defending the interests of the people and of Indian society as a whole. The capitalist orientation of production and its integration with the global imperialist system has wrecked and is further wrecking the economic base of our society.
The only alternative to this disastrous course is for our country to break out of the imperialist system altogether. The economy must be oriented not towards safeguarding the profits of finance capital but towards fulfilling the growing material and cultural needs of the people.
To reorient the economy towards fulfilling the needs of the people, demands that we produce most of what we need within the country. In other words, it means adhering to the principle of self-reliance. Only a minor part will need to be imported from abroad, and a minor part of what we produce will be exported. In other words, foreign trade must play a secondary and complementary role to domestic production. It must be strictly controlled and regulated by the State, rather than be left in the hands of private profiteers to import and export whatever they please. The role and place of foreign capital must be strictly regulated and subordinate to the principle of self-reliance.
As part of this program to reorient the economy, the working class and people must demand and fight for immediate imposition of strict controls over speculative capital flows. We must demand that speculators do not have the scope to put money into the economy and pull it out at will.