Time to wake up? CAD and rupee are to remain stressed until the 2019 polls

An interest rate hike is inevitable and bond yields will not recede. This will impact slowly reviving capital formation. We are not in a sweet spot

Any criticism (even minor) of the government’s economic management elicits a stock response: we have the fastest-growing economy, strong macro fundamentals and are in a sweet spot. This has not been trotted out these past two weeks as the rupee has depreciated.

The government announced its plan of action on September 14. In essence, it said: reduce hedging risk, borrow short-term, ease foreign portfolio investment (FPI), and the government would restrict “non-essential” imports. The next day, the government announced that it would adhere to the fiscal deficit (FD) target and there would be no cutback in capital expenditure.

The announcements