Drop In Indian Rupee/Economy 2013 - All you Need To Know !


Published on

All you want to know about the reasons behind fall in Indian Rupee, who are affected and the measures Finance minister is taking to come out of the situation.

Published in: Economy & Finance, Business
  • thank you boss
    Are you sure you want to  Yes  No
    Your message goes here
  • 3. 10 points stressed by Dr. Manmohan Singh
    Prime Minister Manmohan Singh said in Parliament on Friday said the sharp depreciation in the Indian rupee is a matter of concern, but he reiterated that the currency has overshot its true value and promised a reversal.Here are the 10 things the PM said in his speech:
    a) On rupee fall: Rupee fall a matter of concern. Concerns are justifiable because of the impact it would have on our economy. Forex markets have the notorious history of overshooting... unfortunately this is happening not only to the rupee but other currencies too.
    b) On triggers for rupee fall: The PM noted that global factors like the Syria crisis and the likely tapering of quantitative easing in the U.S. had contributed to the rupee's alarming decline.
    c) On current account deficit: Our CAD is unsustainably large. Deterioration in rupee because of huge import of gold, crude oil imports and coal. Wheat demand in major markets has kept exports from growing. Also hit by collapse in iron ore export. Intend to reduce CAD and bring improvement in fundamentals of the economy. FM has indicated CAD to be below $70 billion and we will ensure all steps are taken to achieve this. Medium term objective to reduce CAD to 2.5 per cent of GDP. Short term objective to finance CAD in orderly way.
    d) On imports: Need to reduce appetite for gold, economize use of petroleum, and incentivize exports.
    e) On inflation: Part of depreciation was a needed adjustment because inflation in India is much higher than in advanced countries. So, there has to be a correction in exchange rate to account for deprecation. WPI inflation has been coming down, even though CPI inflation is high. Depreciation in rupee and rise in petrol prices will lead to upward pressure on inflation. RBI to focus on brings down inflation.
    f) On exports: Rupee depreciation good for the economy to some extent as it helps exports. Over the next few months, effects of this to be felt strongest.
    g) On capital controls: RBI's measures have given rise to doubts about capital controls. The government is not contemplating any such measures. There is no question of reversing polices of last two decades. Sudden depreciation in exchange rate is a shock, but these will be addressed through other measures. We reaffirm our positions about capital control.
    h) On economic growth: Value of rupee reflects the fundamentals of the economy. We intend to do more on economy. Expect growth in first quarter to be flat, but as effects of good monsoon pick up, growth will pick up.
    i) On reforms: Cabinet Committee on Investment has taken a number of decisions that will start bearing fruits in the second half of this year. FDI norms, resolution of tax, fuel subsidy reforms will come into play during the year and will result in higher growth. Expect as the fruits of our efforts materialize, currency markets will recover.
    j) On fiscal deficit; Government will do whatever to contain fiscal deficit 4.8 per cent of GDP. Will take effective steps to control deficit.
    Are you sure you want to  Yes  No
    Your message goes here
  • Government should immediately initiate the following measures such as-
    1. Encourage all kinds of exports by offering the exporters total income tax exemption on their export profits
    2. Discourage all unproductive imports including personal jewelry for domestic consumption. Govt should initiate steps to prevent gold holdings by Indians even for ornaments. Gold imports only for ornament exports only to be encouraged. Similarly oil imports should be reduced and govt should encourage alternate energy sources for oil energy.
    3.Govt should initiate steps for trade surplus and it should discourage all popular steps encouraging imports to please other countries. Country's commercial interests are topmost in allowing imports.
    4. Import substitution industries should be encouraged.
    5. Govt should allow FDI in all sectors at 100% except some sensitive sectors such as Nuclear energy and basic agriculture etc. We should formulate FEMA in such manner where for repatriation of profits can allowed be allowed. This will give major stimulus to the industrial sector and boost for foreign exchange reserves.
    6. All potential sick industries should be freely allowed to tap foreign funds without govt agencies intervention just like local loan transactions.
    7. All tax statutes should be oriented towards encouraging exports.

    Gopi Krishna DSV
    Are you sure you want to  Yes  No
    Your message goes here
No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Drop In Indian Rupee/Economy 2013 - All you Need To Know !

  1. 1. Drop in Indian Rupee Full Report Finance news – by Personnel Concept
  2. 2. • The rupee has fallen more than 13 % this financial year! • And Gold prices set new record high of Rs 33,824 per 10 grams Tuesday on heavy buying as rupee plunged to its new record low of 66.30 against the US dollar.
  3. 3. The Indian rupee and the Indonesian rupiah have been badly bruised over the last two days as a sell off crippled the financial markets in the emerging economies. On Tuesday, both the currencies hit a record low.
  4. 4. What has hit Rupee? The rupee has been hard hit by – • a combination of adverse global and domestic triggers, including India's economic slowdown (growth is down to 5 % annually), • an unsustainable current account deficit, • high inflation and the flow of capital away from emerging markets after the announcements from the U.S. Federal Reserve in June that it was tapering its quantitative easing program.
  5. 5. India is a country with the high current account deficit. So the country is dependent on the foreign economies for financing this. AFP
  6. 6. Possible Reason for this Rupee Decline? • The prevailing consensus is that the UPA has privileged expensive social security measures -- the latest being a Food Security Bill that allocates, less than a year before the next general election, $20 billion to subsidized food for the poor – without taking care of infrastructure needs and the business environment. • With the drying up of economic growth, large welfare programs look unsustainable.
  7. 7. Other areas that will get affected • Indian manufacturing has been hard-hit by the rise in prices of raw materials and components. • Most damagingly, the rising dollar is sure to have a knock-on effect on the economy as a whole because it will increase the cost of oil, the largest expense on India's import bill, and further raise inflation and worsen India's current account deficit.
  8. 8. These events bring back memories of India's balance-of-payments crisis of 1991, the last time the rupee fell this steeply against the dollar, and suggest that hard times may be around the corner.
  9. 9. What Economist say? • As per India’s popular economics columnist Swaminathan S. Aiyar - “a depreciating rupee should make Indian exports much more competitive globally, but India's moribund manufacturing sector doesn't have the resources to exploit this opportunity.”
  10. 10. What Economist say? • “A falling rupee is a political, not an economic disaster. The plunge raises import prices and exacerbates inflation in the run-up to the next general election, just eight months away. ...” - Swaminathan S. Aiyar
  11. 11. What Economist say? • “The danger now is that dysfunction in the Indian economy will strangle any incipient export boom at birth. • GDP growth slowed to 5 % last year, after racing along at 8.5 % for a decade. Industry and, until the recent uptick, exports have stagnated. Inflation has soared. • The current account deficit is almost double what the Reserve Bank says is sustainable. ...” - Swaminathan S. Aiyar
  12. 12. What Finance Minister is saying? • India’s Finance Minister, Chidambaram announced various measures this week to get the economy back on track, even as a cabinet committee on investment gave the go-ahead to 36 major infrastructure projects cumulatively worth $28 billion in a bid to restore investor confidence.
  13. 13. Chidambaram's 10-point prescription to cure the economy 1. Controlling fiscal deficit: The first task at hand is to control fiscal deficit - at 4.8 per cent, the Finance Minister said. He said that while the fiscal deficit was not in control when he took over and was threatening to go beyond 6 per cent even though the Budget said 5.1 per cent, he has managed to keep it in control. He added that the best way to control the deficit was to cut down on expenditure.
  14. 14. Chidambaram's 10-point prescription to cure the economy 2. Controlling current account deficit: Financing the current account deficit has become a major challenge, Mr. Chidambaram said. He said the government will contain the deficit it at $70 billion or below, and will safely finance it.
  15. 15. Chidambaram's 10-point prescription to cure the economy 3. Adding to the reserves: While the reserves are adequate, it is important to add to it, he said. We must use FDIs, NRI investments, banking capital and ECBs, the minister added.
  16. 16. Chidambaram's 10-point prescription to cure the economy 4. Reviving the investment cycle: It is important to unblock the stalled projects, and ensure quicker disbursal of funds where projects have been approved. The Cabinet Committee on Investment has so far cleared 173 projects with an investment of Rs. 1,93,806 crore.
  17. 17. Chidambaram's 10-point prescription to cure the economy 5. Quicken the capex programme of PSUs: Public sector enterprises are sitting on large quantities of cash and it is important to quicken the capital expenditure programme, said Mr. Chidambaram. Even the performance rating of the top management will be linked to it, he added.
  18. 18. Chidambaram's 10-point prescription to cure the economy 6. Capitalise the public sector banks: While the public sector banks are well capitalized and are well above the Basel III norms, it is important to pump in more capital in them to boost investor confidence, Mr. Chidambaram said. He said Rs. 14,000 crore will be invested in the PSU banks, adding that every rupee that is gained out of the disinvestment in Coal India Ltd will be used to capitalize public sector banks.
  19. 19. Chidambaram's 10-point prescription to cure the economy 7. Reap the benefit of the good monsoon: Nothing must be done that will come in the way of maximising agricultural production, and therefore, the gas allocation to fertilizer sector will be maintained and not a single unit of gas will be reduced, the minister said. This will ensure that the maximum amount of fertilizer is provided to farmers all through the year. Banks, too, have been instructed to provide as much loan as the farmers require, he added.
  20. 20. Chidambaram's 10-point prescription to cure the economy 8. Encourage manufacturing: Mr. Chidambaram said manufacturing has been allowed to languish in the country, and given India's size it was important that the sector is revived. He said the imposition of customs duty on high-end flat screen TVs was not capital control, but a way of encouraging manufacturing in the country. Manufacturing must be encouraged in power, steel, metal, automobiles, electronic hardware and textiles
  21. 21. Chidambaram's 10-point prescription to cure the economy 9. Encourage exports: Unless exports are increased, the current account deficit cannot be reduced. Exports have risen 11.7 per cent in July 2013 over the previous year. Trade deficit has narrowed to $12.3 billion in each of these months. Services exports have increased every month since April 2013. Therefore, some of the measures are beginning to bear fruit.
  22. 22. Chidambaram's 10-point prescription to cure the economy 10. Resolve impasse in coal, iron sector: Issues over the environmental and land clearances that have come up due to judicial interventions should be inquired into, but new blocks should continue to be auctioned. Resources: • http://www.bloomberg.com/news/2013-08-28/rupee-s-swoon-dizzies-indians.html • http://www.firstpost.com/business/india-on-a-rocky-road-but-not-in-1997-like-situation-says-sp-1066045.html • http://www.firstpost.com/business/india-on-a-rocky-road-but-not-in-1997-like-situation-says-sp-1066045.html
  23. 23. For more articles on Finance, checkout Personnel Concept Industry news- http://www.personnelconcept.com.au/industrynews.aspx Follow us on Social Media: Facebook LinkedIn Find Finance/Accounting Jobs in Australia (more than 200 jobs!!)- http://www.accountantjobs.com.au/jobs.aspx