+
The rupee may see itself touching 80 over the next one year
ECONOMY & POLICY

The rupee may see itself touching 80 over the next one year

India’s rupee has witnessed around 5 per cent depreciation year to date (YTD) in 2022 and 6.5 per cent year on year (YOY) with the performance somewhere in the middle of the emerging market group. This is in the context of dollar strengthening by ~10 per cent YTD. The pressure on the rupee has been building largely from October 2021, primarily driven by two aspects:
a) Rising crude (and commodity) prices driving a higher current account deficit
b) Tightening of rates by the US Federal Reserve leading to a risk-off scenario impacting India’s capital account flows.
Both these factors have been accentuated by the Russia-Ukraine war since February 2022. The war has only increased the supply-side shocks, driving higher inflation across the world, prompting aggressive central bank actions.

What’s India’s position in this context?
To understand this, let us begin with the background that being a country of net current account deficit, India is dependent on capital flows to balance the deficit. India has built its reserves from the excess of capital flows, unlike many emerging markets, which build reserves from surpluses in the current scenario. In the current scenario, there seems to be pressure on both fronts, which has led to outflows to the extent of $ 28 billion in 2022 YTD and cumulative outflows of ~$ 34 billion since October 2021. Alongside, India’s reserves have declined from a peak of $ 642 billion in October to $ 596 billion, a fall of $ 46 billion.

Both outflows and decline in reserves have some comparable situations in the past two decades…

For the full version, CLICK HERE…

India’s rupee has witnessed around 5 per cent depreciation year to date (YTD) in 2022 and 6.5 per cent year on year (YOY) with the performance somewhere in the middle of the emerging market group. This is in the context of dollar strengthening by ~10 per cent YTD. The pressure on the rupee has been building largely from October 2021, primarily driven by two aspects: a) Rising crude (and commodity) prices driving a higher current account deficit b) Tightening of rates by the US Federal Reserve leading to a risk-off scenario impacting India’s capital account flows. Both these factors have been accentuated by the Russia-Ukraine war since February 2022. The war has only increased the supply-side shocks, driving higher inflation across the world, prompting aggressive central bank actions. What’s India’s position in this context? To understand this, let us begin with the background that being a country of net current account deficit, India is dependent on capital flows to balance the deficit. India has built its reserves from the excess of capital flows, unlike many emerging markets, which build reserves from surpluses in the current scenario. In the current scenario, there seems to be pressure on both fronts, which has led to outflows to the extent of $ 28 billion in 2022 YTD and cumulative outflows of ~$ 34 billion since October 2021. Alongside, India’s reserves have declined from a peak of $ 642 billion in October to $ 596 billion, a fall of $ 46 billion. Both outflows and decline in reserves have some comparable situations in the past two decades…For the full version, CLICK HERE…

Related Stories

Gold Stories

Next Story
Real Estate

Kamdhenu Realities acquires 4-acre Navi Mumbai land parcel

Kamdhenu Realities has acquired a 4-acre land parcel from RPG Life Sciences on Thane-Belapur Road for approximately Rs 1.5 billion, expanding its commercial real estate portfolio in Navi Mumbai.The parcel has a total developable potential of 1.8 million sq ft, on which Kamdhenu plans to develop a destination-scale commercial and lifestyle ecosystem. The proposed development will combine corporate office suites with high-street retail, F&B outlets, double-height lobbies, business infrastructure and lifestyle amenities.Located close to IKEA and opposite the upcoming Pawane Railway Station, t..

Next Story
Infrastructure Transport

97 Per Cent Of Rongjeng-Mangsang-Adokgre Road Nears Completion

Deputy Chief Minister in-charge of public works Prestone Tynsong said in Shillong on 26 August that 97 per cent physical progress had been achieved on the ongoing Rongjeng-Mangsang-Adokgre road being constructed under the Non-Lapsable Central Pool of Resources (NLCPR). He noted the project was sanctioned in 2017 and that the stipulated time for completion had been 24 months from issue of the final work order. The deputy chief minister informed the assembly that the government had decided to include the remaining work under a World Bank project. In reply to a query from Rongjeng MLA Jim M Sangm..

Next Story
Infrastructure Transport

First TBM Starts Digging Five Point Three Kilometre Tunnel Under SGNP

The Goregaon-Mulund Link Road (GMLR) Phase three (B) project has reached a key milestone as the first tunnel boring machine (TBM) began excavation of the first of two tunnels beneath the Sanjay Gandhi National Park (SGNP). The machine, named Tulsi, started cutting a five point three kilometre bore that will link Dadasaheb Phalke Chitranagari in Goregaon East with Amar Nagar in Mulund West. Officials issued a statement noting the commencement of tunnelling work under the protected green belt. The twin tunnels are being constructed using mechanised tunnelling methods that aim to limit surface di..

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

SPECIAL OFFER
QR Code