With the current trend of Sensex going up and anticipations that it would touch 30K point, there will be sufficient inflow of money in the market. This would help rupee to appreciate even to 50 per US dollar from current 60 value.
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But there is a reason that central government as well as RBI may not encourage this appreciation.
- The government will be uncomfortable in allowing appreciation as will it have impact on export sector. Government is looking at an angle where India needs jobs and that too in short term. Jobs are driven by commodities like textiles, construction and of course on export oriented industries. If rupee appreciates, our exports become costly which will impact our export industry
- As far as RBI is concerned it should accumulate good amount of dollars, which is not possible if Rupee appreciates and results in less inflow of dollars for a given value of services.
- The Current Account Deficit (The amount India is in debt to other countries) can also be repaired only by having more exports compared to imports.
The steep increase of Sensex is because of tremendous election result and as it will give country a good stability for the next five years. The cycle should go on – more investments, and there by good results from corporates – then they feed back into investments – there by good economic growth.
In conclusion, it is better to have rupee at the current value of 55-60 for some time to have a good economic growth.
Categories: Finance, Indian Economy, Views
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