Rupee Deceleration Temporary As Indian economy Resilient To Withstand External Shocks

Depreciation of rupee is majorly because of widening trade deficit, rising crude oil prices and strong revival of the US economy, said Mr. D K Aggarwal in a press statement while deliberating in the Open House Discussion on Rupee Volatility, Vice President, PHD Chamber of Commerce and Industry.

India's trade deficit (merchandise) increased from around USD 89 billion in FY2008 to USD 162 billion in FY2018. For the current year, India's trade deficit increased to around USD 63 billion in April - July FY2019 as against USD 52 billion in the corresponding period of last year. International market volatility, increasing trade protectionism, depreciating international currencies including weakness of Chinese Yuan and rise in crude oil prices have put pressure on Indian rupee in the recent times, said Mr. Aggarwal.

However, deceleration in Rupee is temporary as the Indian economy is resilient enough to withstand the external shocks on the back of strong macroeconomic fundamentals and well supported dynamic policy environment, added Mr. Aggarwal. The common view of the Open House Discussion is that the average value of Rupee against USD for the current financial year 2018-19 is expected to remain in between 68 to 69 per USD.

Time is most opportune to increase our exports and the Government at this juncture should remove vulnerabilities in exports such as speedy refunds of exports and motivation to low cost labour intensive exports such as food processing, textiles, leather, etc, said Mr. Aggarwal.

Changes in the international crude oil prices should be reflected in changes in the domestic prices, as increase in the petrol and diesel prices have a significant impact on the Indian economy in form of inflation pressures and impact on overall economic activities. It has been observed that deceleration in international crude oil prices is not reflected in the domestic petrol and diesel prices, therefore, transparency of the benchmark for determining domestic prices keeping in view movement in international crude oil prices is significant.

Going ahead, calibrated measures would be crucial to stabilize the rupee includes restricting unwanted imports, trade facilitation to boost exports, ease of doing business for exporters in terms of getting quick refunds from the Government and credit facilitation to MSMEs at a leveraged rate to boost MSMEs exports, added Mr. Aggarwal.

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