Fair enough to say Nobel winning Joseph Stiglitz was short sighted (in not considering currency peg and other frictions). But other commentators on India currency matters now also seem far more short sighted and are not blameless. In that, comparing India's currency fall with Asian crisis of '97 faced by its counterparts.
Today a country like Thailand has a GDP of $365 Billion with 66 million population. India is nearly 5 times bigger (in output) with GDP of $1.8 Trillion and a population of 1.2 billion. Trade-wise, exports is still a small component of the economy. We are still, for practical purposes, a closed economy. Our currency regime is still controlled, though commentators fashionably call we (India) are almost fully convertible.
On an average India saves about 30% of its income. That's roughly internal savings of over $400-$500 billion every year!. If you see the Foreign Inst. Flows into the country since '91 (as per SEBI- the capital market regulator) the net inflow till date, that is about two decades, is only $140 bn. The problem with India's savings is that they are not fully channelized into financial assets, rather it goes into gold and real estate assets. Leaving household holding of equity and marketable instruments very low. Roughly 8% of India's saving goes into financial assets. As a result, foreign money holds significant stake in India's equity markets and even small shifts in this flow cause wide gyrations in equity prices.
Sure our currency depreciation was waiting to happen because our inflation differential with DM got wider and our growth differential got narrower. Happy to see currency depreciate rather than being pegged like other countries. This depreciation is a natural cure to avoid a disaster. The adjustment required, is happening and will be done.
Other than that, India and its govt knows what it takes to put it back on the growth path. We all know what those issues are. (environmental clearances, fuel price adjustment....). I mean we not walking in the dark.
Therefore comparing India with much, much, much smaller counterparts which are single industry driven, homogeneous economy, homogeneous skill sets, centrally planned economies is just wrong and short sighted.
Just one more quick datapoint. India's USD reserves at $275 billion places it on the 10th highest dollar reserves country in the world. At no. 2 is Eurozone (bunch of countries) and 2 other oil producing nations. Remove these two entities (India has barely any oil and it imports all its needs) India is well within top ten dollar reserves countries in the world.
Regards
M Ashok, CFA