Tag: Rupee

77 anniversary of Independence India Rupee

Rupee Fared Better Among Emerging Mkt Currencies: World Bank

By LokMarg

Indian Rupee has fared relatively well in 2022 in comparison to other emerging market peers, senior World Bank economist Dhruv Sharma said Tuesday after the global financial body revised India’s GDP forecast to 6.9 percent.

“The Rupee has depreciated just about 10 percent over the course of this year. That might sound like a large number, but relative to many other emerging market peers, India hasn’t fared that badly,” Sharma told a press briefing today after the launch of the World Bank’s India Development Update titled “Navigating the Storm”.

For the record, the rupee has come substantially off its all-time low. Currently, it is trading around 82.0 against the US Dollar as against a record low of 83 it breached in mid-October. Tightening monetary policy by the US Federal Reserve and central banks in other advanced economies triggered the depreciation of the Indian currency.

An increase in policy rates in the US and other advanced economies typically leads to a depreciation of the Rupee.

The US Federal Reserve has been raising key interest rates in its fight against red-hot inflation in the country. It raised the key policy rate by 75 basis points to over a decade high at 3.75-4.0 percent, the fourth consecutive hike of such magnitude.

Back home, the Reserve Bank of India had already hiked the key policy rate by 190 basis points since May to 5.9 percent to cool off domestic retail inflation that has stayed above the RBI’s upper tolerance limit for over three quarters now.

The World Bank has revised India’s 2022-23 GDP growth forecast upward to 6.9 percent from the earlier estimate of 6.5 percent, due to robust economic activities.

“India is more resilient now than it was 10 years ago. All steps taken over the past 10 years are helping India navigate the global headwinds,” said Sharma.

“Indian economy has rebounded fairly robustly following the contraction that occurred during the pandemic year. India performed quite well relative to other large emerging market economies, and this story of the rebound has been largely driven by robust domestic demand, and consumption investment,” the World Bank economist said.

On rising inflation in India, Sharma said it was driven by the supply side as well as external factors.

In October, retail inflation was 6.77 percent as against 7.41 percent the previous month. (ANI)

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Experts Say Rupee To Fall Further, All Eyes On RBI Measures

By LokMarg

With increasing oil prices weighing on traders’ sentiments, the rupee plunged to an all-time low of 82.22 against the US dollar in morning trade on Friday. Depending on the rising crude oil and US payroll data, the US Federal Reserve’s stance on monetary policy could also be determined. The rupee had closed at 81.88 in the previous session.

Manoranjan Sharma, chief economist, of Informerics Ratings, said, “the Indian rupee vis-a-vis the US dollar fell 3 percent over the last six sessions to nearly Rs 82.50 versus the dollar. There are both global and domestic factors responsible for this fall. The global headwinds include heightened uncertainties post the Russia-Ukraine war and consequently, risk-aversion and flight to safe havens.”

“Macroeconomic factors include sluggish growth, high inflationary pressures, rising trade deficit, current account deficit, fiscal deficit and foreign investors withdrawing money from the Indian markets together with limited scope for the RBI’s intervention because the forex reserves have fallen from US dollars (USD) 642 billion to USD 540 billion.” He added: “We see India’s current account deficit to be about 3.3 to 3.4 percent of GDP this year. There is a need for close monitoring and vigil on this score,” Sharma said.

Exporters should not be allowed to keep USD earnings beyond five days. The interest rate on NRI (foreign currency) account needs to be increased, Sharma opined, adding that the import duties on non-essential items needed to be increased.

Banks need to be advised by the RBI to start special USD-fixed deposits drive for a maturity ranging from 6 months to 2 years, with enhanced interest rates.

Aditi Singh, economist, at the Bank of Baroda, said, “This was mostly like a reflection of the US data that came out yesterday. There is an anticipation that the US payrolls report will come today leaving some nervousness in the market. The dollar is continuing to strengthen because of that, and that is the reason we are seeing pressure on other currencies. 82 level is breached and we probably see the rupee moving towards 82.5 to 83 level.”

“In comparison to currencies of advanced economies, the rupee had relatively performed relatively better. So, if you see the advanced economies like the yen or the euro or the pound, these currencies have depreciated much more and when you compare it even with the strength in the dollar index, the dollar has appreciated by close to 20%. So, INR has performed relatively more rational, more strength than other currencies and that is because of the strong domestic fundamentals of the Indian economy that is reflected,” Singh said.

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