$ vs Rs

The fundamental reasons for the fall in rupee are, in my opinion :-

(a) Loss of faith in Indian Govt. by levying retrospective tax. Nowhere in the world have I heard this. Businesses are built based on the tax laws as on date. Suddenly you amend a law, saying that the tax has been increased wef last five years, the businesses will collapse. Imagine that your Income tax being increased with retrospective effect - would you like it?. Consequently,other utilities like APCPDCL have taken a hint and are charging you Fuel Surcharge with effect from last three years. A manufacturer takes the present day cost of inputs like power, wages, reasonable margin of profit, etc and fixes the cost of his product. After three years you increase the cost of the power used. From where will he get money to pay. If he increases the cost of his product, there may be no buyers and also this will to inflation.

(b) By passing a law that companies which are winding down must pay two years salaries to the employees. A company closes down only when it is going into a loss. If he is going into a loss how will he pay the two years salaries. Yes, situations like Cotton Mills closing down and land being sold at high value may exist. Treat these cases separately. Take the case of Air Deccan or Kingfisher- do you think they have the money? 

(c) I understand that foreign insurance companies have pulled out their capital and are or have got out of the country. Why? Lack of faith in the country's law making system and also in the law interpretation system. This lead to a large amount of dollars going out of the country.

(d) Recently there was a news item that a lot of currency not printed by RBI was with them for destruction. Why should you release such information to public? In other words, a large amount of the Indian currency in circulation cannot be trusted - so foreign companies will pull out. Recently you may be aware that the parent company Unilever, had offered to buy up Hindustan lever Ltd' shares. Ask yourself as to why? In my opinion, to take away a large percentage of profit out of the country in the form of foreign currency. 

(e) Cancellation of Licences issued and laying a penalty with retrospective effect. How will any one set up an industry, when you can go back on your word, purely for public opinion or vote bank politics. An agreement should be always treated as sacrosanct and should not be violated. 

There are few more actions of the Govt. which has led to this situation - like doling out freebies, food security bill etc. Welfare is fine, but you must earn before you give charity. Petty thinking, lack of foresight and actions for immediate or short term gains have lead to lack of faith in the Rupee - which is being sold like Air Deccan's / Kingfisher's shares.