Rupee continues to slide despite government’s measures to curb depreciation
The rupee is the worst-performing Asian currency and has fallen nearly 12% this year.
The rupee on Monday fell below 72 against the dollar despite measures announced by the government on Friday to curb the currency’s depreciation. The rupee is the worst-performing among Asian currencies, having fallen nearly 12% so far this year, BloombergQuint reported.
The rupee closed at at 72.51 against the dollar, down 0.90% from its previous close of 71.86. The currency opened at 72.49 a dollar and touched a low of 72.69. The BSE Sensex and the National Stock Exchange’s Nifty 50 too sank over 1.3% each.
On September 14, the Centre decided to relax norms for overseas borrowing and impose restrictions on non-essential imports. The move also included easing the cap on foreign ownership limits of individual company bonds.
These moves will help check the current account deficit as well as increase foreign exchange inflows, said Jaitley, without specifying which items would face import restrictions. On Saturday too, the government reiterated its confidence in keeping the fiscal deficit this year within the budgeted limit.
The current account deficit is the difference between the worth of a country’s imports and its exports. A higher deficit means the country buys more products from overseas than it ships out as exports.
However, experts believe the government’s five-point plan will not yield any significant results. “In our view, the announcements may fall short of bringing in the $8 billion [about Rs 57,972 crore] to $10 billion [more than Rs 72,000 crore] estimated by the government because most capital inflows [especially by Foreign Portfolio Investments] are driven by global push factors rather than domestic pull factors,” Nomura Research said in a note to its investors, according to Mint.
HDFC Bank’s Chief Economist Abheek Barua told BloombergQuint that the capital account measures will not result in any significant shift in fund flows in the immediate future. The Centre’s move to give additional exposure limits to foreign investors may not work as they have been pulling out money from the Indian markets, he added.
So far in 2018, foreign investors have sold $879.20 million (Rs 6,371 crore) and $6.31 billion (Rs 45,725 crore) in equity and debt markets.