Political turmoil in India, coupled with the devaluation of many Asian currencies, has meant that the Indian rupee has reached its lowest level against the US dollar for at least 30 years.

Although the rupee dipped sharply at the end of 1997, its decline in value was relatively minor when compared to falls of up to 35% per cent in Thailand and Indonesia.

The latest slide in Asian currencies has driven down the rupee down again. It has fallen by 9% against the US dollar since August 1997.

Yet the economic woes of the East Asian economies are still likely to take a heavy toll in South Asia. That is because the devaluation of East Asian currencies has led to a drop in export prices, especially in plastic and fibres, which threatens to edge out Indian exporters in particular.

Economists have said that India is the only country in South Asia to be directly affected by the economic uncertainty in East Asia.

Pakistan and Bangladesh had already carried out a series of currency devaluations over the last 20 months, before the current bout of economic instability.

But economists have said that instability in East Asia is likely to wipe out whatever benefits may have been derived by those devaluations.

The value of the Sri Lankan rupee has also dropped. That is principally because economic uncertainty in South Korea has had a knock-on effect in Sri Lanka.
 

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