Expert Zone
Straight from the Specialists
Hard currency status a wishful dream for the rupee
(Any opinions expressed here are those of the author and not of Thomson Reuters)
A hard currency is one that is globally accepted as an exchange currency for trade. It is also expected to remain less volatile in the short term and indicate long-term stability through its purchasing power. The perceived strength and confidence in a currency is also a function of its country’s political milieu, fiscal and trade balances, the policy of its central bank and future economic outlook.
Let us look at all these parameters in the context of the Indian rupee and see where it stands on its journey towards acceptance as a hard currency.
India is still insignificant in global merchandise exports and it may take at least a decade, if not more, to improve substantially. During this phase, it will remain energy deficient and hence import oil and other energy equivalents. Though India in the past has done specific bilateral trades (rupee-rouble for example) and may continue to do so in future with specific countries, it is bound to take a long time for the rupee to find wider acceptance in global trade.
Despite India’s substantial economic progress over the decades to emerge today among the ten largest economies in the world in nominal GDP terms and the top three in PPP terms, the rupee has not kept pace with this progress and has witnessed periods of high volatility. In the last five years, it has depreciated in excess of 5 percent of the Compound Annual Growth Rate (CAGR). This can clearly be attributed to expansionary trends in India’s fiscal and current account deficit. Until India traverses the distance from a trade-deficit economy to a neutral or trade-surplus nation, the rupee will always remain unhinged.
Will the rupee fall further?
(Any opinions expressed here are those of the author and not of Thomson Reuters)
On May 31, the rupee fell to an 11-month low of 56.51 to the dollar. It wasn’t the only currency to suffer a loss. Most currencies depreciated during the month; some more than the others.
The appreciation of the dollar reflects an improvement in the performance of the U.S. economy and partly the related possibility of the phasing out of quantitative easing (QE) by the U.S. Federal Reserve. The latter would make the dollar even scarcer.
Budget 2013: A rather ambitious budget
(Rajan Ghotgalkar is Managing Director of Principal Pnb Asset Management Company. The views expressed in this column are his own and do not represent those of either Principal Pnb or Reuters)
Rating agencies have left India’s sovereign rating unchanged after the 2013 Budget. A rating downgrade would mean India getting junk status which is certainly not something one would want when the current account deficit is widening.
Risk factors in Budget 2013
(Any opinions expressed here are those of the author and not of Reuters)
Finance Minister P. Chidambaram has apparently done the impossible. He has brought down the fiscal deficit in the current year from the budgeted 5.3 percent to 5.2 percent in spite of the fall in revenues. What’s more, the deficit was further slashed to 4.8 percent in the 2013/14 budget. Is that realistic?
Look at the expenditure. In the current year, subsidies on food, petroleum products and fertilizer were up by 676 billion rupees or 36 percent. These are precisely the expenditures the minister had to curtail, though he did make an effort to do that too late in the day. With the jump in non-Plan expenditure, the fiscal deficit could be brought down only by cutting Plan expenditure.
Where will the rupee finally rest?
(The views expressed in this column are the author’s own and do not represent those of Reuters)
For nearly a decade, the rupee has been stable — moving in the narrow range of 44-45 to the dollar. But since August last year, the rupee began to slide and in less than six months was down 23 percent.
Dollar shock for Indian hedge funds
(The views expressed in this column are the author’s own and do not represent those of Reuters)
2011 has been an annus horribilis for Indian hedge funds. All hedge funds, with one exception, are currently in the red — the Eurekahedge Indian Hedge Fund Index was down 16.9 pct as of end-October and early reports suggest that things went from bad to worse in November.
When will the rupee recover?
(The views expressed in this column are the author’s own and do not represent those of Reuters)
The rupee sank to its lowest on Tuesday with pressures from the market and absence of support from the RBI. The fall really began in August and in the last four months took the rupee down 18 percent against the dollar.
The fall of the rupee
(The views expressed in this column are the author’s own and do not represent those of Reuters)
Since the beginning of September, the rupee has dropped 11 pct, most of the fall coming in the third week. That has inflated the cost of essential commodities, like petroleum products, and inflated debt servicing of external commercial borrowings. Naturally, this has raised questions. Should the RBI have intervened?
Why the rupee should harden
(The views expressed in this column are the author’s own and do not represent those of Reuters)
The rupee has been uneasy and the stock market nervous since the beginning of this year. The two are not unrelated. For, the fall of the market has been due to absence of FII investment which also deprived the currency market of dollar supply. The outflows more or less matched the inflows and the rupee, with corresponding fluctuations, ended up in August where it had started in January.
