Curb imports to arrest Re fall, say experts

Wednesday 19th September 2018 02:26 EDT
 

The Indian rupee fell by 65 paise against the dollar to close at 72.51 on Monday as against its previous close of 71.86 on September 14 as markets were not assuaged with the government’s measures to boost dollar inflows. Also, sentiment against emerging market currencies turned negative after the US made it clear that it would impose tariffs on $200 billion of imports from China.

The rupee had slipped to 72.69 during intraday trade - close to its last week’s record low of 72.91. Over the weekend, the finance minister had announced a set of measures to ease pressures on the country’s current account deficit (CAD). The measures included allowing Indian manufacturers to raise up to $50 million through one-year external commercial borrowing. The government also eased the ceiling on investment in government bonds by foreign portfolio investors (FPIs) and extended tax breaks on rupee denominated foreign currency bonds or Masala Bonds.

The market was, however, expecting a stronger set of measures such as opening a separate window by the RBI to enable oil companies purchase dollars without disrupting the market. Also many felt that the central government might have to resort to raising of debt from non-residents through a bond issue. “Our conviction is that there is no easy solution to manage a currency ‘crisis’. Abstracting from specific policy choices, the broad thrust of the response will involve belt tightening by the country. The specific choice will be whether to spread the pain throughout the economy or impose deep costs on narrow segments,” said A Prasanna of ICICI Securities Primary Dealership.


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