Lockdown In India! What’s The Problem?

Do not read this article with a politicized mindset, otherwise you’ll not understand even a bit. Just to put everyone at ease, there is no COVID-like medical situation coming up, and no lockdown. Then why did the Indian PM urge everyone to work from home, stop buying excess gold, buy more from Indian companies, among other things?

In short, it is linked directly or indirectly with currency valuation. When we buy goods or services from a company which is not Indian, they’re most likely to convert the INR payment to other currencies, most importantly Dollars. The gold we buy is mostly imported, and the import bill is paid in Dollars, so every time a company imports gold, it converts INR to USD and pays the bill. And the same process works for oil and all other commodities not produced domestically. But why is the Dollar so important?

It is because, the world trades in Dollars, all companies, all countries. But why does everyone have to trade in Dollars? It started in the early 1940s with the Bretton Woods Agreement which established Dollar dominance, though it later partially collapsed when the US could not back its currency with enough gold. After that, in the 1970s when Saudi Arabia was already on its way to becoming one of the biggest crude oil exporters in the world, the US struck a deal with Saudi Arabia to provide them with military aid, economic and developmental support if Saudi Arabia prices its oil in Dollars and accepts payment in USD only. And this was the key moment in Dollar dominance, “The Petrodollar Deal.”

After this, all countries started importing oil from Saudi Arabia in USD, which required them to convert their local currency to USD continuously. Now if a country constantly converts its currency to USD, it would strengthen the Dollar against their local currency, which would make them pay more. So it became important for everyone to maintain the strength of their currency. As a result, all countries started trading with each other using Dollars. There were two reasons to do that, first, crude oil was a necessity and if a country got USD from others, they could reduce the conversion of their local currency to USD which would strengthen their currency against the Dollar. Second, in case of destabilization, they could sell Dollars from their reserves to create demand for their local currency.

That’s how the Dollar became the global trading currency. And that’s the exact reason why all countries care about their value against the Dollar and not other currencies.

Now why is it that all other countries do not care as much as India does about local currencies’ value against the Dollar? It’s not true, everybody does care about their currencies’ strength against the Dollar. Because there are currencies much more vulnerable than the Rupee against the Dollar. As of 10th May, 2026, The Japanese Yen is 157 against $1 (approx.), the Korean Won is 1,476 against $1 (approx.) but the Indian Rupee is 95.15 against $1 (approx.). The reason is not that Japan doesn’t have any current account deficit or it doesn’t import oil or any other goods from anyone. It’s because Japan has some companies that provide some goods and services to the world which nobody else can provide at a better value, so while they’re paying more for the imports than India and other countries, they’re also earning more than others when converting Dollars back to Yen. Similarly, a rising Rupee against the Dollar doesn’t always mean losses, Indian companies like Infosys, TCS, Adani Enterprises and many others that are doing multi-national businesses are earning in Dollars and converting them to INR, that way they’re earning more than before and also strengthening the INR against the USD by converting USD to INR. While India also exports a lot of pharmaceuticals, software services, textiles and many more but at the same time India imports an enormous amount of gold, crude oil, machinery and more. But from the perspective of a growing economy, we’re at a good position CAD-wise. The problem is not there, the problem lies in the Geopolitical situation.

India has great minds, but the minds are working for the US, so if Indian citizens become aware then it’ll be a loss for US and many other countries. So there is a continues effort by US, China and many other nations to destabilize India anyhow.

The Federal Reserve may raise interest rates abruptly to disrupt the INR. The same way US attacked Iran as they knew it would create a rise in Crude oil’s global barrel price, so that all major economies like India, Russia, China and others focus on the immediate problem of Dollar-Yuan or Dollar-INR stabilization because currently India has the chairmanship of BRICS and is constantly trying to start the use of BRICS currency which will de-dollarize the world trade system. Also US wanted control over Iran’s oil, so that Iran could not deal with anyone in local currencies.

And this brings us to the announcement by the Indian PM Narendra Modi about buying less gold, using less petrol, diesel and edible oils, buying more Swadeshi (Indian) goods and services. The current Middle-East conflict raised the crude oil prices, so Indian oil importers are buying more Dollars to import oil and other goods, and the more we convert the INR to the USD, the more the USD is going to strengthen against INR. Generally when we need to strengthen the INR against USD, we try for less conversion of INR to USD and more conversion of USD to INR. The RBI raises repo rates that attract FIIs (Foreign Institutional Investors) to convert Dollar to INR and invest in the Indian markets, the Indian Govt. provides funds from schemes like DPIIT Startup India, so that Indian citizens create companies that make good profits that again attract investments from FIIs, the Indian Govt. strikes deal like the Local Currency Settlement System agreement with UAE to deal in INR and AED instead of the Dollar, the RBI sells Dollars from its reserves to create demand for INR and so on. But it’s also important to not strengthen INR against Dollar too much. If we can earn well in Dollars which we were doing by exporting more to the US and importing less from the US, but the US govt. noticed it and that’s why they did all the tariff drama just to curb the Indian exports for a certain period of time in the name of protecting its own traders’ rights, however the key reason was to destabilize the INR.

All of the economic measures mentioned above and many other measures have already been taken and are practiced by Indian Govt. on a regular basis because of which in the past, the INR was as strengthen as to ₹80 against $1 from ₹88 against $1. But to overcome temporary economic hurdles like Middle-East conflict, the country needs its citizens to be situationally aware. We as citizens of India, always run away from accountability and put everything on governments, Congress did this, BJP did that, AAP is doing that and so on. But we also have some responsibilities. If we don’t want petrol, diesel, crude oil and other imported materials prices to hike, then just simply try to refrain from taking part in transactional processes which ends up converting INR to USD. Let’s use OLA instead of Uber, let’s buy clothes from Reliance Trends and Aditya Birla Ownd instead of H&M and Max Fashion, let’s not use too much petrol or diesel which also pollutes the air eventually, let’s consume less edible oil which is also healthy for our body, let’s support Indian companies. And this is not something we would do temporarily, every country prioritizes domestically produced goods and services, and so should we. And Indian Govt. have already reduced excise duties on Diesel and Petrol, charging ₹0 for Diesel and only ₹3 for Petrol to stabilize prices.

There is nothing to panic about, it’s not that we’re dying, we’re just trying to face a temporary hurdle. India is among the only countries that are still stable after COVID, Russia-Ukraine war, etc. Everything is normal, keep doing whatever you are doing just eliminate unnecessary dependence on foreign companies

Most importantly for small or medium enterprises that are panicking, need not worry. Because if India is taking an effort to stabilize INR, that means it should also make efforts to attract an inflow of more foreign funds. But our focus should always be to continue providing goods and services not necessarily unique, but competitive enough to outperform the rest of the world

In short, there is nothing to worry about. Everything remains normal. Due to the current temporary situation, we’re having to buy more Dollars than before for the import of essential materials, so let’s not buy items from foreign companies which are not essential or which can be replaced by an Indian alternative. Invest in Indian markets through bonds, mutual funds, pension funds, stocks etc. Currency valuation fluctuation is a common occurrence among all major economies and situations like this arise all the time.

At the end, as I always say, “the problem is not in the system, it’s in the people.”

Written by Archi Mazumder | Property of Cabled Society Media | Research & Analysis by Golfer Cause Consultancy