Is Daronomics hitting India now?

MUMBAI: International media reports show that the Reserve Bank of India (RBI) is trying to manage the currency’s parity by selling US Dollars – signaling a possible towards Pakistan’s phenomenon of Daronomics.

RBI – the Indian central bank – was likely selling dollars via state-run banks to support the rupee on Thursday, as the currency declined on the back of dollar bids from importers and foreign banks, three traders told Reuters.

The rupee was down 0.1 per cent at 86.48 against the U.S. dollar as of 12:40 PM – Indian time. The rupee had weakened to an all-time low of 86.6475 earlier this week.

State-run banks were spotted offering dollars near 86.50 levels, most likely on behalf of the Reserve Bank of India, the traders said.

The central bank “seems to be protecting the 86.50 level so we could see it (USD/INR) dip towards the end of the session,” a trader at a private bank said.

The dollar index was at 109.1, while Asian currencies were mixed.

DARONOMICS

This term is used to describe the polices implemented by Pakistan’s former finance minister Ishaq Dar to manage the economy, but which resulted in devastating long-term impacts according to some economic experts.

Daronomics primarily included pegging the US Dollar to Pakistani rupee to maintain parity, and even borrowing foreign currency loans to maintain the currency peg. The economic policy under Dar also kept the State Bank of Pakistan’s policy rate as low as possible, opting instead to control inflation through subsidies and cheap imports.

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