An $84 Billion Short Book Is Putting Pressure on India’s Rupee
The Indian rupee is emerging Asia’s worst performer this quarter and may continue to lag peers as the central bank aims to avert a depletion in its foreign-exchange reserves, according to analysts.
www.bloomberg.com
A slowly devaluing rupee with low volatility is actually in best interest of India. It increases our competitive advantage. So, its a good thing actually.
Now, INR is not facing any downward pressure. Reality is actually opposite of it. Its facing upward pressure. RBI is buying dollars to stop INR from appreciating. Its an opportune time for RBI to build a large forex reserve as a hedge against capital flight in future. Trumpwa has given us a good opportunity.
Why INR is not under pressure?
Because we are fiscally in very good health. We are a growing economy and stable economy under Modiji, so their is actually demand for Indian assets. Their is a net inflow of capital in India. Our BoP is in green.
Internally our gross domestic savings are excellent. Its nearly Rupee 110 Trillions. We need just 40Trillion INR out of these 110 Trillion INR for a nominal 10% GDP growth. Our inflation is low, RBI may even cut rates in upcoming days. So, we have more than enough cash to fund our economy. We don't need much cash from the world. Our own money can fund them. We are no longer cash starved. Our bottleneck is execution capacity. Old PSU were good in cash starved country but are too lethargic in cash rich country when the private sector can execute projects rapidly.
In end Modiji and Nirmala Tai has placed us in a very good and strong position. Modiji need to find out a way to increase state execution capacity by privatizing or private public collaboration.
One of the bottleneck is Indian Railway. Modiji should slowly start to corporatize its operations. Maybe bring in private players in track laying and maintenance. He somehow need to find a way.
Next is he should fund metro and ring road projects. Go bonkers on them. Build the good transit network in our big cities.
Another is bring PLI for Automotive sector and stimulate car ownership. Automotive sector touches almost every industry and consume skilled manpower. It is a mass employment generator. Textile may not be glamorous and too concentrated. But Automotive sector will create jobs even in hinterlands. Everyone need a mechanic to service their periodically.
All in all we are in a good position for stronger growth. Govt. need to continually do incremental well directed and well targeted process reforms. No need for big bang reforms which jolts the economy.
Never lived in Utah before.
We have to open positions for Visas. Trump is doing disservice to USA by restricting visas.
