NEED TO AVOID PANIC

AFTER THE RUPEE plunged to new lows against the dollar, having depreciated to close to 73, the government has finally acted by announcing a slew of measures to prop up the currency. In the past, the Reserve Bank of India has also been using foreign reserves to stabilise the rupee. Some say the interest rate tool will be used next by increasing the repo rate by 25-50 basis points in the next monetary policy.

Globally, after Turkey and Argentina, the focus is shifting now to Brazil. But should the United States make the expected announcement on another set of tariffs on Chinese goods – worth $200 billion — all emerging markets will be thrown into panic. The outlook for the rupee isn’t looking better.