Rupee hits new record low, hits 62/dollar
Last updated on: August 16, 2013 10:28 IST
Rupee hits new record low, hits 62/dollar - Rediff.com Business
Sign of desperation：
RBI junks rumours of controlling FII money - Rediff.com Business
August 16, 2013 16:59 IST
I request all our Chinese and Pakistani friends to control their desperation as of now for economic reforms are not a twenty-twenty match, which can seek you results the way you want them to be 
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Lot of people continue to keep faith in the India growth story, after 9 months there is acknowledgement that the steps we have taken are yielding results, I certainly agree with Fitch that more reforms are necessary and accordingly the government is addressing structural issues, Inflation is moderating and it will in the next couple of months to come, which is a good sign, We will leave no stone unturned to achieve our revenue targets and the GOI will not compress expenditure this year. Whatever has been provided in the Budget will be spent. Both non-plan and plan expenditure are according to target, the GOI has urged ministries and departments to spend the money allocated the money to them to achieve the fiscal deficit target of 4.8 per cent
What's happening in India is not unique to India. Countries with large CAD have seen their currency being hit, such as Brazil, Mexico and Chile. Can there be any doubt that the economy today than what it was in the same time last year?
Yields on Indian bonds have fallen. Yields on US bonds have gone up. Therefore, investors are taking a call. We certainly want our yields to fall and Indian markets offer among the best yields in the world and Suppose we stop gold imports, then the whole situation will change...
Increasing investments in infrastructure, favourable demographics and progress in economic reforms could help Indian equities get higher returns over the long term, India's large young population, which should support long-term consumer demand and overall economic expansion, its expertise in business services, software and generic-pharma development make it a global outsourcing centre. The country's diversified, liquid equity market provides more opportunity for overseas investors to buy local stocks. Most importantly, India has a large working-age population that will drive expansion through personal consumption. Unlike China and many developed nations, India is not grappling with an ageing population that will need substantial societal support. Other potential drivers that could help Asia's third-largest economy to expand are urbanisation, which could significantly boost housing and transportation, improving rural wages, cooperation among parties in the coalition government to pass reforms and potential trade agreements to improve exports.
Yes Indeed I agree the factors that could drive the country's growth have been overshadowed by investor concerns over negative issues such as a fragmented government, widening current account and fiscal deficit, power shortage, poor roads and deteriorating margins in many business sectors but at the same time we are taking steps to tackle the same problem...
And at the same time as far as the steps to Address Current-Account Gap and concerns over India's wide current-account deficit which have been pushing the rupee lower are concerned,
we are making sucessive attempts to reduce our import bill, such as by importing more oil in rupees from Iran. The government will introduce measures to reduce the import of gold, silver and some nonessential goods. State-run financial companies will issue bonds overseas to raise a total of $4 billion to finance infrastructure investments in India. These bonds will be quasi-sovereign, meaning they will carry the implicit backing of the government. India will also ease rules for companies raising funds overseas, including allowing oil companies-among India's largest importers-to borrow more money abroad.
It is estimated that these steps will bring in around $11 billion to India and in the usual course of business, India
would attract $64 billion this year, so the country would end the financial year with a total of $75 billion, which would not only finance the entire current-account gap, but leave something to add to India's foreign-exchange reserves.
The problems faced are short term management problem. The medium term and long term growth prospects is very good...Observing that the Indian government of late has taken a series of executive actions in implementing some of these reforms or removing the hurdles, these are indications of India's commitment to reforms and thus should be assuring for US investors and businesses.
The government is continuously monitoring the emerging external sector developments leading to higher CAD and rupee depreciation. it has taken a slew of initiatives to boost exports and reduce imports, encourage capital flows to facilitate financing of CAD and stem the volatility in the exchange rate of the rupee. Raising the rate of interest subvention from 2 to 3 per cent that will benefit exporters and small and medium enterprises, hike in import duty on gold, liberalisation of FDI, etc.
With these efforts, the current account deficit (CAD) has declined to 3.6 per cent in the January-March quarter from 6.5 per cent in the previous quarter of 2012-13...
Below are the possible steps that the RBI or the government is considering to take to support the currency.
RBI ACTIONS
* FX intervention
* Tighten liquidity further by:
- Raising banks' statutory liquidity ratio of 23 percent
- Further reducing how much banks can borrow from the
RBI under the daily repo auction
- Reducing the amount of funds RBI provides to banks
under the export refinance scheme at the repo rate
- Bond sales via open market operations
- Raising banks' cash reserve ratio, now at a record low 4 per cent
* Raise the policy repo rate, currently at 7.25 per cent
* Provide a dollar-window for oil firms to pay for imports
* Buy oil bonds from companies by paying dollars
* Ask exporters to convert FX dollar holdings immediately
* Ask importers to delay or stagger dollar payments
* Curb speculation by cutting net open position limits
* Persuade banks and financial firms to raise funds abroad
GOVERNMENT MEASURES
* Raise foreign investment limits in debt
* Increase duties on non-essential imports, like electronics
* Attract money from Indian citizens abroad, or issue sovereign debt
* Announce additional fiscal, economic reforms
At last I would like conclude that Major economic policy reforms in India that require legislative changes is most likely to slip away until the next general election and we hope some of the giant economic reforms to be taken in 2014....
in early trade, breaching the previous low of 62.03 hit on Friday.
