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Rupee to hover around Rs 53-55: CII

High current account deficit, policy inaction and high fiscal deficit are the reasons

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Press Trust of India New Delhi

The Indian rupee is expected to hover at around Rs 53-55 as against the US dollar in the near future mainly due to the high current account deficit, policy inaction and high fiscal deficit, a survey has said.

According to a CII survey of 35 economic analysts, the local currency "is not expected to fall further in the immediate future. However, the current exchange rate of Rs 53-55 vis-a-vis the US dollar is the new normal".

Sixty per cent of participants said the rupee will remain at current levels of Rs 53-55.

A majority of respondents felt that the situation would remain volatile till the end of the second quarter of this fiscal year.

"The Indian rupee has declined more than the troubled Euro and GBP currencies, dropping as much as 25.58% between June 2011 and June 2012. This impacts economic confidence, builds up inflationary pressures, and hits industry through rising import costs," CII Director General Chandrajeet Banerjee said.

During April-June this fiscal, it fell by 9.11%.

"The high volatility in the rupee has added to the complexity of business in the country," it said, adding the government and the RBI need to tackle the underlying macroeconomic problems that lie at the root of the fall in the rupee in order to provide some stability in business conditions.

Ranking reasons for decline in the rupee, the main factors pointed out by respondents were high current account deficit, policy inaction and high fiscal deficit, it said.

The survey said improving capital flows with consistent and transparent policies is urgently required.

"FDI in multibrand retail and aviation would go a long way to improve investor confidence. Taxation structures for FIIs, including reducing withholding tax on foreign investment, must be made clear and transparent," it said, adding deregulation of oil prices would reduce both fiscal deficit and current account deficit.

The survey said a cap on gold imports may also help in reducing dollar demand.

 

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First Published: Jul 22 2012 | 12:11 PM IST

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