With reference to the article "India rules out converting idle gold into bullion" (Sept. 1), the Indian rupee has been on a decline along with the currencies of other Asian economies like the Indonesian rupiah by 18 percent, the Philippine peso and Thai baht both by 10 percent. Worryingly, India's current account deficit is wider and the rupee is weaker than in 1991. It hit an all-time low last week and that has raised plenty of concerns over the health of the nation's economy. But there is one group of people who are less likely to complain — Indians working abroad. The dip in the rupee means that their foreign earnings are worth much more, and, as some expats think, it is helping them to realize their dreams, which is not true.

Over the past three months, the rupee has slid 15 percent against the dollar, which is surging against most other currencies worldwide. The reason: economic recovery in the US and the continued faith in the dollar as the reserve currency of the world.

A falling rupee will not only be an economic disaster for India, but a political disaster as well, since the plunge raises import prices and worsens inflation in the run-up to the next general election, just eight months away. Inflation will erode some of the apparent advantages of a cheaper rupee which will encourage exports and discourage imports. Indeed, the rupee’s fall from 45 to 65 a dollar from 2011 to Aug 2013 didn’t lift exports at all as the advantages were offset by high inflation and a lousy business climate.

A country with high exports will be happier with a depreciating currency; the same does not apply to India. India does not enjoy this luxury, mainly because of its increasing demand for oil, which constitutes a major portion of its import basket. The fall of the oil price has helped India fight the depreciating rupee up to some extent but at the same time the Euro zone, one of India's major trading partners, is under a severe economic crisis. This has significantly impacted Indian exports because of reduced demand. Thus India continues to record a current account deficit of around 4.3 percent, depleting its foreign exchange reserves in the bargain and thus depreciating the rupee.

In an attempt to support the currency, the government has increased import duties on gold and consumer durables, and has raised short-term interest rates to curb currency speculation. But unless the nation, whose president and prime minister both are seasoned economist and is holding three trillion dollars of gold, introduces a gold standard for the rupee there is no future for the currency.

The virtue of a properly constructed gold standard is that it’s both stable and flexible —stable in value and flexible in meeting the marketplace’s natural need for money. If an economy is growing rapidly, such a gold-based system would allow for rapid expansion in the money supply. If India wants to realize its full economic potential, relinking the currency to gold is essential. Without it we will experience more debilitating financial disasters and economic stagnation.

Israrul Haque, Jeddah