Which government, UPA or NDA, has had a more calming effect on the rupee? The answer, despite faster growth during the two UPA regimes, is the former.
If you look at the above chart, the rupee's volatility has increased dramatically since 2004. After 2004, the daily variations in the exchange rate start resembling the ECG of a patient with irregular heart-beat and blood pressure - with stronger ups and downs.
On a 23-year perspective, the period of volatility began during the last year of Narasimha Rao's regime around 1995-96, worsened during the United Front regime (1996-98), improved dramatically during most of the NDA's tenure, and simply deteriorated once the UPA came to power.
You can see the squiggles in the rupee's daily variations over the period from 1991 to 2013 - and its obvious that the intensity of ups and downs was very small between January 1999 going right upto mid-2004. After that the daily variations start getting more pronounced and unpredictable, before finally turning dramatically volatile after the Lehman crisis in 2008 - with coincided with a dramatic rise in the mismanagement of India's macroeconomy, too.
The Reserve Bank's Financial Stability Report, from where this chart is taken, is however content to observe that the global financial crisis is the villain: "In general, the Indian rupee has become more volatile after the global financial crises."
The report, released on 30 December 2013, does not try to compare the current global environment with that in the late 1990s, when we had the Asian financial crisis, the Pokharan blasts and subsequent sanctions, and the dotcom bust?
The chart shows that the forex markets have turned volatile with the UPA in power.
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Updated Date: Dec 21, 2014 01:27:53 IST