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The brokerage further noted that the Finance Minister’s statements on foreign trade are ‘highly exciting’, especially since he suggested that boosting exports may be the way to beat the current account deficit.
The finance minister had suggested that there would be changes to foreign trade policy.
"I look forward to the changes that will be made to the Foreign Trade Policy next month and I assure my support to measures that will be taken to boost exports of goods and services," he had said in his budget speech on Thursday.
The current account deficit occurs when a country is importing more than it exports. India’s high import of commodities to meet the country’s energy needs along with other factors including slowing exports has contributed to a current account deficit.
The finance minister drew attention to this in his budget speech.
“My greater worry is the current account deficit (CAD). The CAD continues to be high mainly because of our excessive dependence on oil imports, the high volume of coal imports, our passion for gold, and the slow down in exports. This year, and perhaps next year too, we have to find over USD 75bn to finance the CAD,” said the finance minister.
“While the trade policy itself may or may not contain new benefits for existing, listed exporters, we think that the acceptance of CAD as a big fundamental issue should lead to more tolerance – although not an outright favoring a la Japan - for a weaker INR in the quarters to come,” said the report authored by analysts Nilesh Jasani and Piyush Nahar dated 28th February.
“ We reiterate our Overweight on exporters in the market and a likelihood of a lower highs and lower lows on the INR for the next few years,” said the report.
The rupee dropped 2.14% in the month of February, ending at Rs.54.36 against the dollar on Thursday.
