Releasing the mid-term economic outlook for 2003-04, Subir Gokarn, chief economist, clarified that interest rate till the year end will however will rule around these levels except for hardening of long term yields by 10-20 paise.
He said rupee might depreciate from the current levels, due to multiple reasons. While the year end profit booking by portfolio investors could result in slowdown in dollar inflows, there could easing out of capital flows to US and Japan as these economies sustain recovery.
Moreover , a rise in US rates would squeeze arbitrage margin between US and Indian debt market, there could be slowdown in portfolio inflows as the Indian markets begin to look overpriced compared to underlying growth.
There could be rising trade deficit as well as Indian exports falter due to currency overvaluation and imports remain strong due to continuing recovery. Therefore these put together could induce in the rupee
