Rupee at record low, slide growing worrisome

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By S Jha

New Delhi, July 15: Having kissed the 80 mark against the US Dollar, Rupee has come under severe pressure amid outflow of the foreign fund along with sharp spike in the outgo of the foreign currency reserves for importing the costly crude oil.

The rupee is projected by the financial eagle eyes to touch 82 mark in the near term.

The slide of the rupee has come despite the Reserve Bank of India aggressively protecting the currency from the blow of the foreign portfolio investors who had been selling their India stakes for about 18 months. They are stated to have withdrawn close to Rs 2.75 lakh crores.

The slide of the rupee is good news for exporters and the IT companies, who mostly earn from the U.S. market.

But there are signs of worries for the near term currency market.

“The Indian rupee weakens to a record low, near 80 to a dollar. This is worrying because India’s official inflation is much less than the US inflation. This means, under normal circumstances, the rupee should have got stronger instead of weaker,” tweeted Kaushik Basu, who was the Chief Economic Advisor of India from 2009-12.

India’s foreign currency reserves at USD 600 billion, having come down from the record level of close to USD 650 billion, is stated to be a comfortable. India’s foreign debt almost equals the currency reserves, but the good part is that the most of the overseas debt is on the accounts of the private enterprises.

But more stress is stated to be in the pipeline for rupee since about 40 per cent of the foreign debt of India would mature in the next 12 months.

Indian government has been laying much stress on boosting exports, but the gains are being negated by higher import bills on account of the crude oil, gold and coal, which have risen alarmingly in the recent months.

The silver lining, however, is the push of the US President Joe Biden to nudge the oil producers to step up productions to calm down the crude oil prices to gain breather for the global inflation. In this context, India’s inflation is essentially imported.

It must also be stated that most of the global currencies, including Euro, have slumped against the US dollars, indicating the clear trend that the slowdown is much widespread.

The move of the government to trade in rupee internationally is expected to calm down some stress, but that may take a long term to show any result, since New Delhi essentially trades in its own currency with Russia and Iran only.

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