MCCI seeks immediate intervension

INR Downslide :

Indian Rupee- The worst performing currency in Asia in 2011 and the third worst globally which has depreciated by 26% against U.S Dollar (USD) since August last year plummeted to a historic low of INR 55.82 to a USD today. Analysts foresee further downfall of the rupee to INR 56-57 against USD in future against the backdrop of risk aversion hitting global markets particularly with India’s largest trading partner Europe and sentiment souring over India because of its gaping trade and current account deficits, paltry manufacturing sector growth, rising number of scams and competing political interests.

The worst affected by the Indian currency volatility are the Importers, followed by Government and Individuals since the external cost of borrowing or interest rate rises. Students studying abroad are the most helpless of the lot due to constant fluctuation of the currency.

MCCI is seeking immediate interventions of RBI and the Government to check the sharp movements in the rupee and prevent a downward spiral in its value, but balancing it with the need to retain reserves in the event of prolonged turbulence.

Our Chamber also recommends that the Central Bank needs to infuse more dollars through open market window to curb the dollar demand thereby enabling the stock market to boom automatically. Government requires to undertake more focused policy measures by attracting long term Overseas Investments into India by opening key sectors including Retail, Insurance, Pension, Defence and Aviation which would increase capital flows and reduce the pressure on the currency, inflation and interest rate.

Our future depends on, how effectively the Central bank and the Government play their master strokes to balance the Foreign exchange rates with little impact to the relative areas of Foreign exchange usage and dodge the economic upheaval unscathed.