{"id":27439,"date":"2018-10-23T14:07:47","date_gmt":"2018-10-23T08:37:47","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=27439"},"modified":"2018-10-23T14:07:47","modified_gmt":"2018-10-23T08:37:47","slug":"where-goes-the-rupee","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/where-goes-the-rupee\/","title":{"rendered":"Where goes the rupee?"},"content":{"rendered":"<p><a href=\"https:\/\/www.thehindu.com\/opinion\/lead\/where-goes-the-rupee\/article24962273.ece\">Where goes the rupee?<\/a><\/p>\n<p><strong><u>Article:<\/u><\/strong><\/p>\n<p>1.Bhaskar Dutta, a professor has talked about interventions required by the RBI and Government to defend Dollar.<\/p>\n<p><strong><u>Important Analysis:<br \/>\n<\/u><\/strong><\/p>\n<p>2.Continued weakening of Rupee over a period of time has raised the concern over the stance RBI and how Government will adopt to deal with it.<br \/>\n3.Depreciation of Rupee is an immediate concern.<\/p>\n<p>4.Fundamental reasons behind the depreciation of rupees:<\/p>\n<p><u>Internal Factors:<\/u><\/p>\n<ul>\n<li>India has been unable to boost exports over the years.<\/li>\n<li>India\u2019s efforts in finding domestic source for energy have been inadequate, causing high oil import and widening CAD<\/li>\n<li>Trade wars among emerging markets.<\/li>\n<\/ul>\n<ol start=\"5\">\n<li><u>External Factors: <\/u><\/li>\n<\/ol>\n<p><u>Reasons for attraction towards U.S.economy<\/u><\/p>\n<ul>\n<li>Global capital and Currency speculations are attracted towards U.S economy.<\/li>\n<li>Cut in Corporate tax in U.S, resulted into shifting investment from emerging market.<\/li>\n<li>Increased interest rate has further attracted investors.<\/li>\n<li>Unstable political and economic fundamentals in emerging economies leading to reduced portfolio investment in emerging markets.<\/li>\n<li>Appreciating Dollar not only against Rupees, but also against Euro and Pound.<\/li>\n<\/ul>\n<p>6.<u>Government has taken various measures to bring capital inflow and boost economy like:<\/u><\/p>\n<ul>\n<li>Curbing non-essential imports and boost export.<\/li>\n<li>Encourage inflows into masala bonds (exempting them from withholding tax and letting banks become market makers).<\/li>\n<li>Encourage corporate bonds (removal of the 20% single-exposure limit on foreign portfolio investors)<\/li>\n<li>Encouraging manufacturing firms to raise short-term external commercial borrowings in order to curb dollar demand. Though, it may not work as the sentiments are not favorable towards emerging market.<\/li>\n<li>Government is relying on higher direct tax collections and non-tax revenue (disinvestment proceeds) to make up for shortfalls.<\/li>\n<\/ul>\n<p>7.Further weakening of Rupees will have an adverse effect on domestic economy such as:<\/p>\n<ul>\n<li>Hike in fuel price. (This can be brought under control by decreasing excise duty and VAT.)<\/li>\n<li>Subsequently, Retail inflation (mainly food items) in an economy may spike.<\/li>\n<li>Balance of payment crisis.<\/li>\n<\/ul>\n<p>8.<u>Options available to RBI:<\/u><\/p>\n<ul>\n<li>Increase Dollar supply and thereby check the appreciation of Dollar, but with caution.<\/li>\n<li>It is very less likely that Monetary Policy Committee will raise interest rates if inflation cross the target of 4 %.<\/li>\n<li>The monetary policy committee should respond to the inflationary result of depreciation, rather than go for rate hikes.<\/li>\n<\/ul>\n<p>9.Moreover, increase in interest rate will further have an adverse effect on company\u2019s profit (High interest rate, less profit to companies).<\/p>\n<ul>\n<li>Any big negative change in profitability may make foreign investor pull out of Indian stocks.<\/li>\n<\/ul>\n<p>10.<u>Alternatives recommended by the Author:<\/u><\/p>\n<ul>\n<li>Induce special floating NRI bond (NRI bonds are forex deposits raised from non-resident Indians at attractive rates for a period of 3-5 years) to attract foreign currency.<\/li>\n<li>Investors must be protected from exchange rate fluctuation.<\/li>\n<li>Most importantly sharp fluctuation in exchange rate in either direction needs to be avoided.<\/li>\n<\/ul>\n<p>11.The government needs to think of a long-term plan to boost exports by removing policy barriers that are impeding the growth of export-oriented sectors.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Where goes the rupee? Article: 1.Bhaskar Dutta, a professor has talked about interventions required by the RBI and Government to defend Dollar. Important Analysis: 2.Continued weakening of Rupee over a period of time has raised the concern over the stance RBI and how Government will adopt to deal with it. 3.Depreciation of Rupee is an&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/where-goes-the-rupee\/\">Continue reading <span class=\"screen-reader-text\">Where goes the rupee?<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[555],"tags":[],"class_list":["post-27439","post","type-post","status-publish","format-standard","hentry","category-test-1","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704772236},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/27439","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=27439"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/27439\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=27439"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=27439"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=27439"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}