Correlation between exchange rates and election in India | Hacker News Reader

Correlation between exchange rates and election in India

newslaundry.com

34 pointszengr11 comments

Quote - "Huge profitability gained by bringing back black money stashed abroad in order to cover Election expenses".

The rupee can't devalue because of this. Large buy orders would only make the rupee appreciate. Rather, what would still make more sense is the politicians and businessmen sending the black money abroad, just before the elections to safeguard it due to the uncertainty if the next government would support them.

He is not suggesting that the Rupee is devalued due to money being brought back.

Rather he is suggesting that the currency is being manipulated using other means so that money which is brought back from abroad gets a much more favorable rate when converted into rupees.

Not sure whether I agree with this though

What could these other means be to manipulate the currency in an open market?

I haven't noticed any policy changes and RBI, is primarily selling dollars, in low quantities though.

You are not quite understanding the graphs (and their proposed interpretation ) correctly. What the OP is saying is that the Rupee is being devalued (As seen by rising $ to Rupee curve) by the Govt in power, in the months preceding the next general elections in preparation for getting their stashed money (dollars) from outside (Swiss banks) into India and get a favorable exchange/conversion rate. As seen in the curve, the curve apparently goes up (dollar value goes up) right until just before the elections, and then the black money is brought in and converted in large amounts, which as you suggest appreciates the Rupee value immediately( as seen by the curve starting to go down).

I was thinking the same thing. Your reasoning makes more sense.

Edit: but again, they could send back money any time, just to be sure. But they do need money urgently during elections. Not so sure about your reasoning now.

I doubt this. If Forex comes in India, Rupee should appreciate. No matter whether it comes through legitimate banking routes or illegal laundering, if $ is brought in Rupee should appreciate and vice versa.

Also I doubt the money being brought in by the political parties would be enough to move the currency at the scale it is moving.

The charts are misleading. INR has steadily lost value against Dollar over last 3 decades, more so after 1991. Only during the 2002-2007 period it gained, because a lot of $$ were coming in. Now that foreign investors are taking their money out, Rupee is being hammered.

Something is being talked about as being devaluated, but on the chart the line keeps increasing. I can only guess that what is being plotted is the currency ratio $/Rs, or how many Indian Rupees makes one dollar. And what then devaluates, is the value of Rupees in dollars.

To the person who created the news page, for god's sake man, do your charts right, and say what the fuck is being plotted on each of the axes, instead of leaving it to guesswork.

You're not an economist are you... graphs could be better but the way it's done takes an extra 20 secs to interpret.

Causation? One of the comments points out that the rupee has fallen 25% since the adoption of the new rupee symbol (http://en.wikipedia.org/wiki/Indian_rupee_sign).

Thanks for posting this - this is genuinely one of the most interesting links I've discovered through HN.

I look forward to reading more comments and hypotheses. Currently the biggest questions is that raised by ankitoberoi - what other means could be used to manipulate the currency to such a large extent?

Sure RBI may be selling $ primarily. But what are foreign governments and private organisations doing? It is likely that they are also playing a role in currency manipulation.

Most emerging market currencies like Brazil. Paul Krugman feels this is temporary.

http://krugman.blogs.nytimes.com/2013/08/20/rupee-panic/

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