He noted that the increased uncertainty in the Euro Zone on account of the sovereign debt crisis has led to shifting of capital from Europe to the US which has hardened the US dollar against most currencies. The rupee which was Rs 44.4 to a dollar in April has depreciated to Rs 52 as of November 21, 2011.The rupee pared losses after plunging to a record 52.73 a dollar today. It closed at Rs 52.32 as of 5 p.m. on Tuesday.
Pranab cautions against over-stretching to reach fiscal deficit target
Meanwhile,the Petroleum Ministry wants Rs 56,600 crore more in cash subsidy to partially compensate the state-owned oil firms for losses they incur on selling fuel below cost.
The subsidy sought is over and above the Rs 30,000 crore assistance already promised by the Finance Ministry for the first half of the current fiscal.
Troubled Galaxy Destroyed dreams-Chapter 712
Palash Biswas
http://indianholocaustmyfatherslifeandtime.blogspot.com/
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23 NOV, 2011, 05.33AM IST, ET BUREAU
Is the bottom falling out for the rupee?
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Rupee off lows on local shares, euro rise
Is the bottom falling out for the rupee? The rapid movement in the Indian currency's exchange rate against the dollar - 18% down since this August - has led many people to raise an alarm and the markets to tumble. There is neither room for panic nor any need for the central bank to intervene.
The RBI's data for the rupee's trade weighted real effective exchange rate against a basket of six currencies shows an appreciation, by end-October, of 8.5% over the average for 2004-05 and of 6.65% over the average for 2009-10.
This real appreciation took place even as the nominal effective rate, similarly trade weighted for the same set of six currencies, was falling. The trend is similar for the index that measures the real purchasing power of the rupee against a basket of 36 currencies.
The rupee is stronger than it was in 2004-05 , and has been rising. This has consequences for a country's overall balance of payments, ability to inspire investor confidence and attract capital, as also overall competitiveness.
India's current account deficit widened to a high of 2.5% of GDP last fiscal. It has been widening steadily this year as well.
If it is kept under 3% of GDP, there is little to worry: it shows India is able to draw in foreign savings, shows that India is a good little emerging market, a net absorber of goods and services from the rest of the world, boosting production and jobs in India's trade partners, unlike a certain other emerging market that keeps its currency undervalued.
However, if the current account deficit goes up to levels at which external investors begin to ask whether India would be able to service the foreign capital that bridges this gap, we would enter very risky territory. The rupee's tendency to appreciate in real terms needs to be kept down to keep the current account deficit below the danger mark.
Capital movements, too, play a role in determining the exchange rate. So, raising India's attraction as an investment destination for direct and portfolio investment - this is essentially a function of restoring credibility and speed to governance and decision-making - is a legitimate way to attract capital inflows. Nothing more and nothing less needs to be don.
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http://economictimes.indiatimes.com/opinion/editorial/is-the-bottom-falling-out-for-the-rupee/articleshow/10837273.cms
Beggars Smiling!Falling rupee means high food prices for you!The recent depreciation of the rupee against the US dollar has wiped out the "little benefit" that was derived from the softening of international commodity prices, the Finance Minister, Mr Pranab Mukherjee, said here today.
"There's nothing preventing the rupee heading into uncharted waters. We don't really know where it will stabilise against the dollar," Abheek Barua, chief economist of India's HDFC bank, told AFP. The rupee hasfallen 15 percent since July on worries ...
The Centre may not pursue any aggressive belt-tightening on expenditure front so as to reach the fiscal deficit target of 4.6 per cent (as a percentage of GDP) set for fiscal 2011-12.
An indication to this effect was given by the Finance Minister, Mr Pranab Mukherjee, in a suo motu statement on inflation in Lok Sabha today.
He said the fiscal deficit target of 4.6 per cent for 2011-12 was a difficult target given the deterioration in the global economy and its impact on India over the last three to four months.
"We have to be careful not to overdo ourselves in reaching this target since that can have an excessive slowing down impact on growth," Mr Mukherjee said.
He noted that the increased uncertainty in the Euro Zone on account of the sovereign debt crisis has led to shifting of capital from Europe to the US which has hardened the US dollar against most currencies. The rupee which was Rs 44.4 to a dollar in April has depreciated to Rs 52 as of November 21, 2011.The rupee pared losses after plunging to a record 52.73 a dollar today. It closed at Rs 52.32 as of 5 p.m. on Tuesday.
The rupee skidded to an all-time low on Tuesday as oil refiners and other companies scrambled to buy dollars, with the currency looking increasingly vulnerable to a swelling current account deficit.
Exposure to short-term portfolio flows, a rising oil import bill and slowing export growth have heightened the risk on the rupee and the outlook remains bearish.
There is also the increasing likelihood the US super committee will fail to reach a deal on debt restructuring, which could trigger another major round of selling of in emerging market and risky assets.
At 10:40 a.m. (0510 GMT), the rupee was at 52.58/59 per dollar, after touching an all-time low of 52.73, and 0.8 percent weaker than its previous close of 52.1550/1650.
At its record low, the rupee has slumped 16.8 percent from its 2011 high reached in late July.
"The outlook for the rupee continues to look weak at this point. The next technical level on the chart shows 55.11," said Ashtosh Raina, head of foreign exchange trading at HDFC Bank in Mumbai.
"There is all-round demand coming in from all quarters and there are unlikely to be any ranges for the market now."
Describing the sharp depreciation of the rupee as "disruptive", the Reserve Bank said any action to arrest the fall will be guided by medium-term considerations.
"We don't really have a target or a rate in mind. It's moving as per market dynamics. It (fall in the value of the rupee) is disruptive, there is no question. There (will be) impact on our import bill, particularly for energy. It's having an impact on companies and it is a problem," Reserve Bank Deputy Governor Subir Gokarn told reporters here.
On the possibility of action by the central bank to arrest the fall of the rupee, Gokarn said, "Any action we take now (will) have to take into account the fact that these actions might have consequences a little further down the road. So we have got to balance out actions with risks or a potential increase in vulnerability later on..."
"Actions have to be weighed in terms of their medium-term risks," he added.
The immediate impact of the fall in the value of rupee, he said, will be on the inflation rate, which has been hovering near the double-digit mark for several months.
"We should not be looking at only the short-term when we make these judgements. Every action that has been suggested... that has been debated, also has potentially adverse consequences down the road. So we have got to balance out those too."
Although the RBI has been maintaining that the exchange rate should be market-determined, it is volatility that has been worrying the central bank.
"... Volatility is another thing. This is the sharpness and speed of the movement that is obviously creating some disruptions. We don't know where it is going to go, but it is something we need to watch out for," Gokarn said.
Indian rupee, which breached the Rs 48 per US dollar mark to a 2-year low in the intra-day trade yesterday, is likely to remain under pressure in the near term and will be around Rs 47/USD by the end of this year, global research firm Macquarie said.
"We expect the rupee to remain weak in the near term if the trade-weighted US dollar continues to rise. We expect the rupee to remain in the range of 46.5-47 through end-December 2011," Macquarie said in a research note.
Since August, the rupee has been the worst performing currency in the Asia, excluding Japan region, as it has moved from 44.1 to 47.8. The trade weighted US dollar has appreciated 3.5 per cent during the period.
The rupee tumbled to nearly two-year low of Rs 48.01 per US dollar in early trade yesterday on persistent demand for the American currency from banks and importers.
The dollar has been firming in overseas markets as well. Today, the rupee fell 14 paise to Rs 47.78 per USD in early trade, extending losses for the ninth straight session on strong demand for the dollar from importers and banks.
Notwithstanding the fact that the depreciation in the rupee is good for exporters, Macquarie said, "In the event of high global commodity prices it would likely result in policy rates remaining higher for longer."
The rupee has depreciated by 8.5 per cent against the dollar since August, compared to the Korean won's depreciation of 5.1 per cent, the Malaysian ringgit's 4.8 per cent drop and the Indonesian rupiah's 3.7 per cent fall.
Besides, factors such as a high current account deficit, high trade deficit, slowdown in capital flows and high crude prices, the global uncertainty is also weighing on the rupee, Macquarie said.
"The evolving euro-zone debt concerns have increased the uncertainty in the currency market," Macquarie said, as the rupee has depreciated by 4.1 per cent against the USD but appreciated 0.4 per cent against the Euro.
Rupee is likely to remain under pressures in the near term largely owing to the fact that India runs a high current account deficit of 2.6 per cent of GDP, and high trade deficit of 7.6 per cent of GDP as of FY'11, Macquarie said.
Besides, any major risk aversion in global equity markets can result in a slowdown in capital flows and India, which imports around 80 per cent of its oil requirement, is likely to see a further widening of the current account deficit because of high oil prices, Macquarie added.
Falling rupee wipes out gains
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The recent depreciation of the rupee against the US dollar has wiped out the "little benefit" that was derived from the softening of international commodity ...
Falling rupee means high food prices for you Hindustan Times
Falling rupee: Exporters under pressure to offer discounts Economic Times
Indian jitters over free falling rupee The Express Tribune
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With the Indian rupee touching all-time low levels, Indian expatriates in the UAE are literally cashing in on the high remittance rates. ...
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15 SEP, 2011, 03.00PM IST, REUTERSRupee off lows on local shares, euro rise
MUMBAI: Rupee trimmed intraday losses in afternoon trade on Thursday in tandem with the rebound in local equities and some rise in the euro.
At 2:27 p.m, the partially convertible rupee was at 47.72/73 per dollar weaker than Wednesday's close of 47.62/63 but stronger from the day's low of 47.92.
The euro was at $1.3764, higher from the day's low of $1.3704 and from $1.3724 at end of rupee trade on Wednesday, while the index of the dollar against six major currencies was at 76.779 points from 76.910 previously. * The local benchmark share index erased all early losses and rose nearly 0.4 per cent.
Further rise in the rupee may be capped as sentiment on the euro is broadly bearish given the new twists emerging from the euro zone debt crisis, traders said.
European Union officials warned the region's finance ministers on Wednesday of systemic crisis risk due to the sovereign debt crisis, while French President Nicolas Sarkozy and German Chancellor Angela Merkel said they were determined to keep Greece in the euro zone.
Meanwhile,the Petroleum Ministry wants Rs 56,600 crore more in cash subsidy to partially compensate the state-owned oil firms for losses they incur on selling fuel below cost.
The subsidy sought is over and above the Rs 30,000 crore assistance already promised by the Finance Ministry for the first half of the current fiscal.
"At the current rates, under-recoveries (revenue loss) of oil marketing companies (OMCs) in the current fiscal is likely to be of the order of Rs 1,30,000 crore," said Mr G C Chaturvedi, Oil Secretary.
The Oil Ministry wants the share of upstream companies like ONGC, which gives discounts on crude oil they sell to refiners to make up for a part of the loss on fuel sales, to be limited to one—third of this revenue loss, or Rs 43,329 crore.
"We would like their share to be one-third. The rest we want the Finance Ministry to bear," he said.
In first two quarter of the current fiscal, upstream firms Oil and Natural Gas Corp (ONGC), Oil India and GAIL bore one—third of the Rs 64,900 crore under—recovery on fuel sale.
The Finance Ministry gave Rs 30,000 crore and the rest was borne by refiners, Indian Oil, Bharat Petroleum and Hindustan Petroleum.
In the April-September period, the three firms lost Rs 64,900 crore on selling the three fuels below cost.
The three firms are losing Rs 11.44 per litre on diesel, Rs 26.94 per litre on kerosene sold through the public distribution system (PDS) and Rs 260.50 per 14.2—kg LPG cylinder supplied to domestic households for cooking purposes.
"The oil marketing companies are incurring a daily under—recovery (revenue loss) of about Rs 360 crore on sales of diesel, PDS kerosene and domestic LPG," an industry official said.
If the prices are not revised, the oil firms will end the fiscal with a total revenue loss of about Rs 130,000 crore.
The Oil Ministry, Mr Chaturvedi said, wanted the upstream share be limited to historic one—third, or 33.33 per cent, of the total under—recovery or revenue loss. The Finance Ministry, however, wants the contribution by ONGC, OIL and GAIL India to increase to at least 50 per cent.
Falling rupee means high food prices for you
Zia Haq, Hindustan Times
New Delhi, November 22, 2011Email to Author
Author's Blog
First Published: 00:54 IST(22/11/2011)
Last Updated: 02:15 IST(22/11/2011)
Ordinary Indians will feel the impact of the weakening rupee, which hit a record low of 52 to a dollar on Monday, most in terms of high food prices. India imports a slew of food items, such as pulses and edible oil, to meet domestic demand. A falling rupee simply makes imports
costlier since India now has to pay more, in terms of rupees, for the same goods and services it imports.
According to a Reserve Bank report, a declining rupee and higher minimum support price (MSP) announced last month pose fresh risks to food prices, which remain significantly elevated.
Food inflation eased to 10.63% for the week ending November 5, in contrast to 11.81% the previous week, but economists consider this a mere blip.
"Despite a normal monsoon this year and record production of foodgrains last year, food price inflation may not moderate much in an environment of increase in rural wages, significant increase in MSPs and persistent input cost pressures in the farm sector," the central bank has said.
The rupee has lost over 16% of its value against the dollar so far this year.
"India's imports account for about 22% of its GDP, and depreciation of the rupee raises the risk of imported inflation," the RBI report said.
India imports 21% of world's pulses to meet domestic prices, according to Pravin Dongre, president of the Mumbai-based Indian Pulses & Grains Association.
"Prices of commonly consumed pulses, which have been so far stable, will go up somewhat on the back of a weaker rupee," Dongre said.
A weak rupee also directly cranks up the government's fuel expenses, which fans prices of most other goods.
The value of oil imported by India, in dollar terms, has declined since July 2011 owing to a fall in global crude prices. In rupee terms, however, it has increased due to the domestic currency's depreciation.
http://www.hindustantimes.com/India-news/NewDelhi/Falling-rupee-means-high-food-prices-for-you/Article1-772310.aspx
With Indian exporters witnessing "unexpected" gains due to rupee depreciation against the US dollar, global buyers have started putting pressure on them to offer discounts of 5-10 per cent on shipments, citing recessionary conditions or by finding fault with products.
Not wanting to "sour" their trade relations with buyers by getting into any argument amid a weak global economic sentiment, most Punjab exporters working in different industry verticals, including garments, sports goods and light engineering items, have begun to accept the "wishes" of importers.
The rupee, which has been Asia's worst-performing currency against greenback, has fallen by a whopping 15 per cent since July this year and is presently hovering above Rs 51 a dollar.
"The excitement of the depreciating rupee against the dollar is short-lived, because buyers have started pressurising us to offer the maximum discount on export of products in view of dollar appreciation, which will yield more realisation in rupee terms," Wool and Woollen Export Promotion Council Chairman Ashok Jaidka told PTI today.
Exporters said buyers are projecting that the rupee will soon depreciate to Rs 54 per US dollar and have asked for a discount ranging between 20-25 per cent for booking new orders after factoring in the projected rupee value. "But after hard bargaining, they finally settle at an 8-10 per cent discount," he said.
Exporters pointed out buyers are going even to the extent of finding faults with products and have cited the poor economic scenario in their countries to get the maximum price reduction. "It is buyers from Europe and USA, Middle East, African countries who are demanding a price cut," said Engineering Export Promotion Council Regional Chairman S C Ralhan.
In the case of hand tools and other light engineering items, Punjab exporters are giving a 2-5 per cent discount to buyers, exporters said. Punjab's annual exports amount to over Rs 13,000 crore.
While there is some "forced" reduction of product prices, in the sports good sector, there are internal arrangements between exporters and importers whereby exporters automatically decrease the rates of products after the exchange rate breaches a negotiated mark.
"We have to reduce our product rates once exchange rate goes beyond certain mark fixed with our buyer and it goes vice-versa when rupee appreciates," a Jalandhar-based sports goods-maker disclosed, seeking anonymity.
He said buyers would always want their suppliers to reduce the price after they come to know that exchange rate fluctuation is giving good "returns" to exporters.
However, for some exporters, the fall in the rupee value against the greenback is not seen as a boost in view of a consistent increase in input costs.
"Depreciating rupee is not a thing to cherish for us as input costs like steel have gone up substantially. Moreover, discontinuation of Duty Entitlement Pass Book Scheme was also a dampener for exports," said Ralhan.
23 NOV, 2011, 01.34AM IST, ET BUREAURupee hits life low; to put pressure on inflation as imported goods, commodities to cost more
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MUMBAI/HYDERABAD/NEW DELHI: The rupee sank to a record low as intensifying sovereign crisis in Europe drove investors to seek safety in US dollars even as local policymakers debated whether intervening to stop the slide would help.
Importers such as Indian Oil and Maruti Suzuki are being driven to despair, but exporters are not celebrating either as most of them had hedged locking themselves up at higher levels without anticipating such a sharp fall.
Persistent weakening of the rupee against the greenback will put pressure on inflation as imported goods and commodities will cost more, testing the RBI's resolve to pause interest rate hikes.
If the government attempts to neutralise it by keeping oil prices low, it may have to borrow more from the market, pushing rates up. The rupee's tumble has already pushed state-run oil companies to knock the doors of the petroleum ministry seeking a special window at the RBI to buy dollars, said people familiar with the matter.
"The pace of depreciation over the last four months has been too fast and can potentially wipe out margins for many businesses," said Soumyo Dutta, managing director & head of trading at Citigroup.
EU Crisis Takes Centre Stage
"We need some policy measures immediately, which will reverse the negative sentiment and will start getting the country some capital inflows." The rupee weakened 0.3% to 52.3225 to the US dollar, taking the fall this year to 14.6%, the worst in Asia. It fell past the previous low of 52.18 reached on March 3, 2009, and tumbled to a life low of 52.73 intra-day. The Chinese yuan and Mexican peso also declined.
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The crisis in Europe took centre stage, with a German finance ministry official saying, "We haven't any new bazooka to pull out of the bag." Yield on Spain's 10-year bond rose 8 basis points to 6.63%. The Greek two-year note yield climbed 60 basis points to 112.66%, Bloomberg News reported. The extra yield investors demand to hold Belgian 10-year bonds instead of benchmark German bunds increased 27 basis points to 317 points after Belgium's coalition talks were suspended.
Indian policymakers offered no solace to those hit by the slide with Finance Minister Pranab Mukherjee saying, "RBI intervention (in the forex market) will not help." But Governor Duvvuri Subbarao left it open for the market to guess. "The RBI can intervene and will intervene when it is consistent with our policy," he told an audience in Hyderabad.
"But I cannot tell you whether we did it yesterday or will do it today." The central bank's hesitation is partly due to the weak economic fundamentals of the country.
"We are the only economy running a current account deficit whereas most other Asian economies are current account surplus," said Ashish Vaidya, executive director-trading at UBS. Unbridled spending and consumption of the last few years have weakened government finances.
EDITORS PICK
- Sensex falls below 16000; trade may turn volatile
- Asian stocks slide on China flash PMI
- Risky index futures lose out to options due to volatility, higher taxes
- Nifty may find resistance around 4880: Manoj Muralitharan, IIFL
- Asian shares drift lower as growth fears hit miners
Central Bank of India
BSE
89.05
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Vol:22706 shares traded
NSE
89.00
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Vol:95007 shares traded
Prices|Financials|Company Info|Reports
http://economictimes.indiatimes.com/markets/forex/rupee-hits-life-low-to-put-pressure-on-inflation-as-imported-goods-commodities-to-cost-more/articleshow/10835256.cms
23 NOV, 2011, 09.48AM IST, REUTERS
Reserve Bank of India likely sold dollars around Rs 52.55: Traders
MUMBAI: Indian state-run banks were spotted sellingdollars in the market starting at 52.55 rupees on Wednesday, likely on behalf of the central bank to stem rupee's slide, five traders said.
At 9:23 a.m., the partially convertible rupee was at 52.05/06 per dollar, after weakening to 52.60 in early deals. On Tuesday, the unit had hit an all-time low of 52.73, before closing at 52.2950/3050.
"Lots of selling from state-run banks ... it has to be the RBI ( Reserve Bank of India), no one else would sell like this," a senior dealer with a foreign bank said.
The central bank has always maintained that it does not protect any particular level on the rupee and would only intervene to iron out excessive volatility.
"There is some selling from corporates as well but such a recovery is not possible without the central bank's hand," another dealer with a state-run bank said.
Exports will offset high import costs for FMCGs
PURVITA CHATTERJEE
SHARE · PRINT · T+
The hyper-volatility of the rupee is not sustainable and input costs like palm oil used in soaps can be affected
MUMBAI, NOV. 22:
With the rupee reaching an all-time low against the dollar, FMCG companies are likely to offset the high cost of imports (mainly raw material) with their increased export earnings.
In fact, it is palm oil imports which are likely to hit soap-making FMCG companies.
As Mr A. Mahendran, Managing Director, GCPL, says, "The hyper-volatility of the rupee is not sustainable and input costs like palm oil used in soaps can be affected. However, in our case, only one-third of the company's turnover comes from soaps so we are not that affected while on the other hand our exports will get a boost."
However, the impact of the rupee depreciating would vary across FMCG companies. In the case of Dabur margins may get affected, especially in the beverages category.
According to Mr Sunil Duggal, CEO, Dabur India, "Margins will be impacted as import of raw materials would be costly. But we import merely 10-15 per cent of raw materials and the impact is unlikely to be that significant except in categories like beverages which could lead to a price increase."
In the case of Nivea India, which imports nearly two-thirds of its finished goods, for which it pays in euros and not dollars, the business plan is likely to change next year. Mr Rakshit Hargave, MD, Nivea India, said, "Buying forex covers is not cheap and the dollar and euro depreciating is bad news for us. But thankfully our top line has expanded and so we are not impacted immediately. However, next year we have to change the business plan and take a transactional route and buy euros at the current level."
HEALTHY EXPORT TURNOVERS
Other FMCG companies like Marico and GCPL already have healthy export turnovers and are likely to get compensated in spite of the sliding rupee.
"At one level imports will be costlier but Marico will benefit due to the overseas business which is currently 23 per cent of our turnover," says Mr Vijay Subramaniam, CEO, International Business, Marico.
Adds Mr Milind Sarwate, Group CFO, Marico, "Companies that kept their imports or foreign currency loan positions open will be hurt to the extent the payment / repayment is due in the near future. The weaker rupee will hurt even as regards the longer term payments, but there may be some elbow room for covering the risk. Similarly, those who have hedged their export positions at a lower rate will have an opportunity loss. Marico does not have any such issues at this point in time. We at Marico have benefited from a clear definition of the foreign exchange management policy and its rigorous implementation."
"FMCG companies importing palm oil like GCPL and HUL might have already hedged their import exposure but the larger picture of the impact would be on their foreign currency debt, especially the unhedged portion of that debt," claims Mr Kaustubh Pawaskar, FMCG analyst at brokerage firm Sharekhan.purvita@thehindu.co.in
Keywords: Rupee slide, exports, offset, high import costs, FMCG
http://www.thehindubusinessline.com/industry-and-economy/article2650616.ece
Consumer goods spend may rise to $5 b by 2015: Nielsen
OUR BUREAU
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NEW DELHI, NOV. 15:
Despite rising inflation, spending on fast moving consumer goods (FMCG) in India is set to nearly triple to $5 billion by 2015, from $1.8 billion at present. While most of this spending is seen in modern retail stores where sales have gone up by 31 per cent, a report by the Nielsen Company also noted the continuing popularity of kirana stores because of access, credit and home delivery.
"While modern retail represents 5 per cent of India's retail sales…. Indian shoppers are clearly enjoying spending in modern stores," said the Nielsen India Executive Director, Mr Roosevelt D'Souza, said at an event organised by the market research firm on Tuesday. For instance, 54 per cent of packaged rice and 42 per cent of breakfast cereals are bought in modern retail stores.
Mr Arun Maira, Member, Planning Commission, said keeping the global economic slowdown in mind, there was need for a new business model that created "inclusive capitalism" along with democracy. "India is a large market with very poor people," he said and urged Indian industry to take the lead in developing an innovative business model to make it more affordable and accessible to all citizens.
Private labels continued to gain popularity. According to the Nielsen study, Indian shoppers spend over $100 million on private labels annually.
This is expected to rise to $500 million by 2015.
Compared with China, where private label products contribute only 1 per cent to the total modern trade sales, in India, private labels account for about 7 per cent of the total sales, the report said.
Keywords: Increased spending, FMCG goods, retail stores, kirana stores, inflation, Nielsen
http://www.thehindubusinessline.com/industry-and-economy/marketing/article2630537.ece
Wake up and smell the rupee
Hindustan Times
November 22, 2011
First Published: 21:37 IST(22/11/2011)
Last Updated: 21:40 IST(22/11/2011)
The government's helplessness over a falling rupee is very real. Under textbook conditions, monetary policy faces an impossible trinity of keeping both exchange and interest rates free in an environment of unimpeded capital flows. The rupee is in a managed float; India's capital account is not
free. Despite this the rupee has plummeted 15% from the beginning of the year as the trade gap widened and international investors fled to the safety of dollar debt. The copybook response to capital flight is monetary tightening, but that option is already nearing exhaustion after a bruising battle with inflation at home. If the Reserve Bank of India (RBI) now starts selling dollars it will have to suck more rupees out of the system, pushing up interest rates further. The Indian economy has lost quite a bit of steam due to the deliberate ministrations of its policymakers. It could begin to sputter if the government tries to prop up the rupee.
The other policy response does not hold out great hope either. The financial crisis of 2008 has led to a reassessment of capital controls worldwide. Some degree of control is now being advocated by even the likes of the International Monetary Fund, whose sole mantra till recently was free markets. India, however, already has far tighter capital controls than what is being contemplated in the global arena. A further tightening would be an unfortunate throwback. Our policy towards foreign capital has been easing ever so gradually since India opened up to the world in 1991. This despite the fact that we save less than we invest and import more than we export. These two gaps, adding up to nearly 6% of the gross domestic product, have per force to be bridged by money from abroad. Foreign capital has been persistently financing India's fiscal and trade deficits and our policymakers must heed it when it seeks greater access to our economy.
So if interest rates cannot be raised and capital flows cannot be curbed, the Indian economy must learn to live with the prospects of a falling rupee. Unless the government gets serious about controlling its bloated expenditure — particularly subsidised energy, most of which we import — the economy remains vulnerable to hot money flows. As it is, the 2011 capital flight has caught our policymakers on the wrong foot. India's tight monetary and loose fiscal stances are working at cross-purposes. This inconsistency has been allowed to linger since the RBI started on a series of 13 interest rate hikes in March 2010. With the rupee headed further downhill, the government should wake up and smell the coffee.
http://www.hindustantimes.com/editorial-views-on/Edits/Wake-up-and-smell-the-rupee/Article1-772686.aspx
It's time RBI bit the bullet
Business Standard - 12 hours ago
If dealing with high-interest rates and raging costs was not bad enough, corporate India now has a free-falling rupee to battle. What has irked India Inc the most is not just the unprecedented fall in the currency, but the central bank's rather brazen ...
Is the worst of the rupee panic over?
Moneycontrol.com - 1 hour ago
Adding to the difficulties for a central bank that is already fighting with high inflation, a widening trade gap and slowing economic growth, the falling rupee has added to the never ending woes in the market. Much to the expectation of a sense of ...
Action to stem Re fall likely from Wednesday: Govt sources
Moneycontrol.com - 12 hours ago
According to sources, RBI will now step in aggressively to stem this fall and two-three steps are being contemplated to stem this fall in rupee at this point in time. One of the steps is with regard to asking banks to restrict their long positions on ...
Rupee dips to lifetime low of 52.73 against dollar
Times of India - 6 hours ago
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Rupee fall to add to cos' interest burden
Business Standard - 10 hours ago
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Rupee plumbs new depths, drops 0.3%
Livemint - 10 hours ago
From fertilizer firms to car makers, Indian companies have begun to count the cost of the falling rupee. The Indian Farmers Fertiliser Cooperative Ltd wants a $36 a tonne reduction in the price of potash, $50 a tonne cut for di-ammonium phosphate and ...
Rupee's fall sparks calls for action
Financial Times - 5 hours ago
But if these reforms are not passed, Mr Kumar warns that the rupee could fall to as low as Rs54 or Rs55 against the dollar. Please don't cut articles from FT.com and redistribute by email or post to the web.
Skidding Rupee Hits Record Low Against Dollar
Wall Street Journal - 13 hours ago
A senior government official told Dow Jones Newswires that the central bank is likely to take some steps to help state-run oil importers, which are hit hard by the falling rupee. Details weren't available as of late Tuesday. Analysts say there are no ...
Good reasons for rupee's fall but also for recovery
Reuters Blogs (blog) - 12 hours ago
It's been a pretty miserable 2011 for India and Tuesday's collapse of the rupee to record lows beyond 52 per dollar will probably make things worse. Foreigners, facing a fast-falling currency, have pulled out $500 million from the stock market in just ...
The great fall of rupee: Experts see no cure now, but RBI 1
Moneycontrol.com - 19 hours ago
... in the Indian currency, experts Anant Narayan of Standard Chartered Bank and Sajjid Chinoy of JPMorgan suggest that despite the volatility being global, in the short term, it is only the central bank that can intervene and arrest the free fall.
The rupee saga is not yet over
Livemint - 10 hours ago
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RBI intervention will not stop rupee fall: Pranab
Times of India - 21 hours ago
PTI | Nov 22, 2011, 12.49PM IST NEW DELHI: With the rupee falling to a lifetime low, finance minister Pranab Mukherjee on Tuesday said RBI intervention in the forex market will not arrest the slide as FIIs' pullout and global reasons were behind the ...
RBI cannot boost weak rupee – Finance Minister
TruthDive - 19 hours ago
New Delhi, Nov 22 (TruthDive): Finance Minister Pranab Mukherjee commenting on falling rupee against the dollar said, "RBI intervention (in the forex market) will not help." He told reporters here that withdrawal of foreign institutional investors from...
Rupee plunge may blunt India's inflation fight
Daily News & Analysis - Nov 21, 2011
State-owned oil marketing companies, which sell diesel and cooking fuels at government-controlled prices, are also piling up revenue losses as a falling rupee is pushing up the cost of oil imports. Every rupee's fall against the dollar pushes up the ...
Rupee fall may make India Inc foreign loans costlier by $5 bn
Chandigarh Tribune - Nov 20, 2011
"I don't think depreciation of rupee hurts the Indian economy. When we have slowing economy and rupee depreciates, it is positive for India," he told PTI. However, he admitted the falling rupee will definitely hurt those companies which have borrowed ...
Drastic fall of rupee is disruptive: RBI
IBNLive.com - 21 hours ago
The rupee has been depreciating for quite some time and fell to a historic low of Rs 52.73 per dollar in early trade on Tuesday. On the possibility of action by the central bank to arrest the fall of the rupee, Gokarn said, "Any action we take now ...
Not enough firepower
Livemint - 8 hours ago
The falling import cover and the domestic liquidity crunch make heavy RBI intervention unlikely, though critics are quite justified in asking whether policymakers should have explicitly signalled their unwillingness to aggressively defend the rupee....
Rupee hits life time low, Pranab says RBI intervention will not help
NDTV - 22 hours ago
At noon, the rupee traded at 52.68 against the dollar, falling over 60 paise, or 1.2 per cent. The Indian currency has fallen19 per cent since August Fresh weakness in the currency came despite a rebound in equity markets. The Sensex and the broader ...
rupee hits all-time US dollar low
BBC News - 20 hours ago
On Tuesday, the Sensex index of leading shares was up slightly, after falling 2.6% on Monday. There had been eight straight sessions of decline. Kishor Ostwal, chairman at CNI Research, told Reuters: "So long as the rupee is falling, I don't think ...
Rupee fall may make India Inc foreign loans costlier by $5-bn
Economic Times - Nov 20, 2011
NEW DELHI: The falling value of rupee may make the foreign loans availed by the Indian companies this year costlier by an estimated over Rs 25000 crore (about USD five billion), if the current currency valuations persist, experts have warned. ...
RBI, Govt monitoring rupee movement: Fin Min
Hindu Business Line - 19 hours ago
PTI With the Indian rupee falling to a historic low against the US dollar, the Finance Ministry today said that the Reserve Bank and the Government are monitoring the situation. "The RBI and the Government are monitoring the issue. ...
RBI must intervene in currency markets to stem Rupee fall: AV Rajwade
Economic Times - 22 hours ago
So, there is no natural way or market way in which the rupee is going to stop sliding. So the only way is and yes that would mean as you rightly said that it would further tighten liquidity which would have its own impact in terms of sort of money ...
Indian rupee hits record low against US dollar
AFP - Nov 21, 2011
MUMBAI — The Indian rupee on Tuesday hit a record low against the dollar, as fears about eurozone debt and the global economy as well as falling local stock markets provoked further selling of the currency. Therupee plunged to 52.50 against the ...
Recovery after plunge
Calcutta Telegraph - 7 hours ago
"The RBI did not intervene aggressively when the rupee was falling. Moreover, it talked down the currency and this was one of the reasons which also has led to its fall," says an analyst. "Going ahead, we believe that the persistence of global risks ...
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Falling rupee scares car makers; price hike likely - Rediff.com ...
16 hours ago – Hit by the depreciating rupee, auto companies, including General Motors India and Toyota Kirloskar Motor, are mulling hike in prices to offset ...
Car prices set to go up on falling rupee - The Times of India
The rupee depreciation is adding to the cost and we will be going in for a revision from January next year," Toyota Kirloskar Deputy MD (sales ...
Auto companies hit by falling rupee; General Motors, Toyota mull ...
18 hours ago – The hit due to the weakening of rupee comes at a time when auto makers have been enduring one of the toughest periods with car sales.
Falling rupee cold comfort for IT companies - Moneycontrol.com -
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Falling rupee means high food prices for you - Hindustan Times
www.hindustantimes.com/.../Falling-rupee.../Article1-772310.aspx
7 hours ago – Ordinary Indians will feel the impact of the weakening rupee, which hit a record low of 52 to a dollar on Monday, most in terms of high food ...
Auto cos hit by falling rupee; GM, Toyota mull price hike
zeenews.india.com/.../auto-cos-hit-by-falling-rupee-gm-toyota-mull-...
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History of the rupee - Wikipedia, the free encyclopedia
Jump to The fall of the Rupee: As the price of silver continued to fall, so too did the exchange value of the rupee, when measured against pound ...
Falling rupee stares at uncharted waters
5 days ago – May breach 52 level against $; inflation pressures worsen.
Rupee Power: How the falling rupee affects Indian economy | Firstpost
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www.firstpost.com/.../rupee-power-how-the-falling-ru...22 Sep 2011 - 3 min
The cost of oil, current account deficit, inflation, corporate margins, interest costs, foreign investments, exports ...
Business Line : Industry & Economy News : Falling rupee wipes out ...
www.thehindubusinessline.com/industry.../article2650375.ece?ref...
12 hours ago – The recent depreciation of the rupee against the US dollar has wiped out the "little benefit" that was derived from the softening of international ...
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