THE RUPEE TOLL

Business Today - - THE BUZZ - – Anand Adhikari

THE LIST OF NEG­A­TIVES for rupee value against the US dol­lar is in­creas­ing by the day. It all started with higher crude oil prices and now there are talks of an im­mi­nent trade war with the US where In­dia en­joys a trade sur­plus.

Where is the Rupee headed? In just six months it de­pre­ci­ated by over 7 per cent from

` 63 lev­els in Jan­uary this year to ` 68 lev­els. This sharp de­pre­ci­a­tion places the In­dian Rupee among the worst per­form­ers in emerg­ing mar­kets.

With yields up in the US mar­ket, the re­sul­tant out­flow of US dol­lars from emerg­ing mar­kets in­clud­ing In­dia, com­pounded by weak do­mes­tic macros, In­dia faces a per­pet­ual trade deficit. A trade war with the US will weaken the Rupee fur­ther as In­dia en­joys a trade sur­plus with the US. If our ex­ports are hit, the trade deficit and CAD will fur­ther widen, while higher in­ter­est rates abroad will re­strict the dol­lar in­flows into In­dia. The long-term outlook for the In­dian rupee looks neg­a­tive.

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