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CRISIL Urges Govt. Policy Change to Revive Rupee
Jul 4, 2012 6:54 AM
By Dilipp S Nag
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RAPAPORT... The Indian government needs to implement a series of policy changes to revive the rupee, CRISIL said. The research company stressed that the currency, which has lost about 25 percent in value in the past year against the greenback, could appreciate back to around INR 50 to $1 by March 2013. The rupee traded at INR 54.49 to $1 at press time on Wednesday after touching an all-time low of INR 57.32 to $1 in June.
CRISIL’s outlook depended on the initiation of some policy measures to strengthen the currency, maintain steady economic growth, curb inflation and ease the current account deficit, which may take affect due to the recent softening of crude and commodity prices. These factors could combine to boost investments in India. CRISIL also expects the Eurozone crisis to improve by the first quarter of 2013, which would further stimulate a return of capital to India.
Recent measures taken by the Reserve Bank of India, including raising the foreign institutional investor investment limit in the government securities market and reducing the residual maturity on such investments, could attract capital inflows in the medium term, CRISIL stated. The decision to allow manufacturing and infrastructure companies to avail external commercial borrowing to repay rupee loans in the domestic banking system could also stimulate capital inflows in the short term.
CRISIL expects that the rupee will remain under pressure without the foreign capital injections. The current account deficit may ease to 3.6 percent of gross domestic product in 2013 from 4.2 percent in the previous year. CRISIL noted that if government maintains its current domestic policy, coupled with prolonged Eurozone problems and ongoing global economic weakness, the rupee may settle anywhere from INR 55 to $1 to INR 57 to $1 by March next year.
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Tags:
Crisil, Current account deficit, Dilipp S Nag, Dollar, Eurozone, FII, gold, imports, India, Policy, Rapaport, RBI, Rupee, US
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