HDFC chairman Deepak Parekh has said the rupee is expected to strengthen marginally in the coming months on the back of robust portfolio and foreign direct investment inflows.
Parekh said India has witnessed strong FII inflows in the capital markets during the first quarter this year, as a result of which the rupee has strengthened.
On whether he sees rupee strengthening further, he said, "Marginally. I think yet some more money is expected. You know Indian economy is doing well... FDI flows will also come in. It had slowed down a bit but I am sure it will pick up." He was speaking on the sidelines of a CII function on Tuesday night.
The rupee has been ruling strong this week and appreciated today by 12 paise to a fresh 19-month high at 44.33 a dollar in early trade on continued capital inflows by foreign funds in stock markets.
Parekh said, however, that India should continue with its open, flexible currency policy, indicating that it should avoid a policy to peg the rupee to a fixed value against the dollar like China has done.
"We want the free society, we want the open flexible currency policy," Parekh said.
He added, however, that it is not necessary that the rupee will keep strengthening, saying that 5-10 per cent fluctuation is going to continue.
Citing the example of the recent financial crisis, Parekh said, "A lot of money went out and the rupee collapsed at that time. It almost touched Rs 49 (to the dollar) some months ago. It was not too long ago, it was a year ago."
He said, while rupee strength doesn't suit some sectors, it does suit some others.
"Exports may be a little weak. IT sector, because of rupee strength is a cause of concern, but the margins of the IT companies and the back-office companies... Are large. So they may be impacted marginally but nothing to worry about."
Parekh exuded confidence that the Indian economy would be able to grow at 9 per cent and "with a little bit of more reforms in number of sectors, I am sure we can get to the 10 per cent."
He said, while all the sectors Indian economy were performing well, agriculture needed to show growth.
"I think agriculture sector has to perform. It (foodgrain production) is more or less stagnant, and if that grows by 5 per cent or 3-4 per cent, then I am sure our growth rate can go up to 9 per cent in the current year," Parekh said.
