Ru­pee Needs to De­pre­ci­ate More

The Economic Times - - Commodities Plus -

In a chat with ET Now, Chetan Ahya, MD, Mor­gan Stan­ley, says pub­lic capex and FDI in­flows can help eco­nomic growth Yes com­pletely. I do not think that the ru­pee on its own de­serves this kind of ap­pre­ci­a­tion. It is ba­si­cally a re­flec­tion of the dol­lar weak­ness. So, if you get dol­lar strength­en­ing back again, we will be back on the de­pre­ci­at­ing path and we think the ru­pee needs to de­pre­ci­ate a lot more be­cause of the pric­ing pres­sures that the cor­po­rate sec­tor is fac­ing with PPI non­food still in deep de­fla­tion. So cor­po­rate sec­tor needs to get pro­tec­tion from a weaker cur­rency. Ru­pee should be weaker which would be good for cor­po­rate sec­tor. In your re­cent re­port you said what we are see­ing now is rem­i­nis­cent of what hap­pened be­tween 1998 and 2002 What is that you are pick­ing in terms of the cy­cle turn­around at this junc­ture? I think the ge­n­e­sis of the re­port was more to fo­cus on ex­pe­ri­enc­ing what is hap­pen­ing right now and com­par­ing that with 1998 to 2002 where In­dia took the right steps in terms of pol­icy but the global macro en­vi­ron­ment was hit­ting growth outlook. For ex­am­ple, we had be­tween 1998 and 2002, weak pric­ing power for the cor­po­rate sec­tor, ex­ports were weak, ca­pac­ity util­i­sa­tion was low and there­fore the pri­vate cor­po­rate sec­tor was not in­vest­ing. In the back­ground, we also had the legacy debt is­sue and the non-per­form­ing loans is­sue for the bank­ing sec­tor. So a lot of these fac­tors are sim­i­lar. (Full in­ter­view at www.eco­nomic­times.com)

Do you think the cur­rent ap­pre­ci­a­tion of ru­pee is a func­tion of global fac­tors like weak­ness in dol­lar index?

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