Who Would Want this Indian Rupee?

Imagine an American work program that guarantees work for 100 days per year for two-thirds of American population. Since the Government cannot guarantee a job, the program would actually guarantee payment to 200 million Americans for 100 eight-hour days at the minimum wage of $7.25 per hour. Total cost = 100*8*7.25*200mm = 1,160,000 million dollars or $1.16 trillion dollars.

Can America afford this? Why not? The 2012 U.S. budget deficit was only $1.2 trillion. So this jobs-payment program would merely double the 2012 budget deficit. What would happen to the U.S. Dollar if such a program becomes law in America? It would go down hard, but really what difference would that make to the majority of Americans, especially when America begins using domestic natural gas instead of OPEC oil?

Since America can easily afford this, let us be more ambitious in our social welfare aims. Add payment for a basic amount of free food and free medicines to 200 million Americans. The Dollar would go down farther and interest rates would rise. But we will finally help less fortunate Americans reach the American dream, won’t we?

Will this vision help American politicians win elections in America? Not yet, in our opinion. But what about 2025? The non tax-payer segment of the U.S. electorate would be an absolute majority by then, if current trends continue. Would they support politicians who guarantee such a social safety net?

This is neither a fairy tale nor a nightmare. This is reality in today’s India. The payment for work program described above was actually implemented in India after the last election in 2009. And you see what has happened to the Indian Rupee since July 1, 2009. It has fallen by more than 30% since that election.

But does that matter? India’s ruling party doesn’t think it does. So last month they implemented a Food Security program last month that guarantees payment for a basic level of food for about 800 million Indians, about 2/3rds of the country’s population.

The new Food Security bill, the old jobs program and smaller programs like free medicine form the election platform for the ruling party. Listen to what Rahul Gandhi, the heir apparent for prime minister of India, thundered in an election rally this week:

  • “Poori roti khayenge, 100 din kaam karenge, dawaiee lenge, aur Congress ko jitanyenge”

Literal translation – we will eat full bread, work for 100 days, take medicines and make Congress victorious.

This does boggle the mind. We have never heard a prime minister candidate ask his people to merely work for 100 days per year and receive payment for these 100 days regardless of whether they actually work or not. Add basic amounts of free food, free medicines for two-thirds of the country and you have a happy content electorate.

That is the ruling party’s formula for the upcoming election in 2014. Indian voters will decide next year whether they buy it or not. But owners of Indian Rupees need not wait. What will they do once the current oversold rally in the Rupee ends?

By the way, the above is just the program at the central level in Delhi. Each state has its own social programs. This week, the state of Maharashtra announced its program to aid victims of rape. Under this  “Mental Courage Scheme”, any woman who is raped in the state (boys & men can’t be raped per Indian law) is entitled to compensation from the state in the amount of 200,000 Rupees for rape and 300,000 rupees for an “exceptional” rape.

And what is the eligibility for “rape” compensation under this scheme? According to an activist quoted in the Times of India,

  • “The survivor or her family needs to make a claim after the FIR has been filed and hence there ought not to be any delay or wait for a verdict,”

So a mere filing of a police complaint entitles the complainant woman to this compensation. She doesn’t need to prove her case nor does a court have to deliver a verdict. And the law mandates the police to register any rape complaint without any investigation.

By the way, according to Indian law, virtually every single heterosexual American male is a “rapist”. Why? Because if a man has consensual sex with an unmarried woman and does not marry her afterwards, the consent is post facto nullified by Indian law and the sexual act gets legally redefined as “rape”. So any heterosexual American male who has had more than one unmarried female sexual partner in his life would be judged as a “rapist” in Indian law.

Assuming America has 150 million men, assuming 70% of them will have only 1 non-marital female sexual relationship in the next 5 years and assuming women are 100% honest in reporting their non-marital sexual relationships, what will such a rape compensation program cost America? The answer is 150*(0.70)*3100 = $ 325,500 million or $325 billion dollars over five years assuming a $/Rs exchange rate of 64.5.

And why should the State pay compensation to a woman for rape? The answer, according to the Times of India article:

  • “The scheme is necessary, said women’s activists since rape as an offence assaults the very fundamental right to life with dignity enshrined by the Constitution for every citizen.”

The American Constitutions establishes more basic human rights than the Indian Constitution. But in America, a human right is not an entitlement from the State. Because America is a democracy of the people, by the people and for the people. And people cannot claim entitlement from the people. 

This fundamental difference is why India is NOT a democracy. It is not a rule of the people. The Indian Government is the Ruler or the Sovereign of the Indian people. That is why the Indian people act as supplicants towards their government and demand compensation from it. The provincial Indian governments have merely replaced their Warlords or Sardar of old and the Delhi government has replaced the central King, Maharaj or Shah.

Now you understand why the Indian middle class is desperate to send their children to America, Europe or Australia. Now you understand why the Rupee has gone down from 7.5 to a dollar to 64-68 since we earned our first paycheck.

Knowing all this, would you own the Indian Rupee except as a short term trade? Who would?

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