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'Rupee seen consolidating at around 60/USD by year end'

PHD Chamber of Commerce & Industry (PHDCCI) expects the rupee to recover further from its current level and consolidate at around 60 per US dollar by end Dec 2013. 

The appreciation and consolidation of rupee by Dec'13 will be driven by many factors such as improving capital flows, improving export/import ratio and overall current account balance. 

PHD Chamber expects FIIs and FDIs inflows to pick up further in the coming months when the steps announced by the RBI such as rationalising foreign exchange outflows by resident Indians, opening a Swap Window to attract FCNR(B) Dollar Funds, flexibility to exporters and importers to hedge foreign currency risks, expansion of bilateral currency swap arrangement between India-Japan, setting the overall limit for access to LAF for each bank at 0.5 percent of its own NDTL and mandate to banks to maintain a minimum daily CRR balance of 99 percent of its requirements begin to materialize. 

These measures would go a long way to stabilise rupee scenario, going forward, said chamber in a press statement on Wednesday.

PHD Chamber expects export/import ratio to improve further in the coming months on pick up in exports scenario vis-à-vis revival of demand conditions in advanced economies and significant decline in gold imports.  

The export to import ratio declined from 57.6 percent in April 2013 to 54.9 percent in May 2013 which then improved significantly to 66 percent in June 2013. Since then, the ratio has been increasing steadily and was recorded at 67.8 percent in July 2013 which increased to 70.5 percent in August 2013.

India's gold imports declined significantly from about US$2200 million in the month of July 2013 to about US$650 million during August 2013. Gold imports are likely to ease further on the back of restrictions on investments in gold bars and coins and hike in customs duty on gold imports to 10 percent.

Though volatility in the rupee scenario may continue due to news flows from advanced economies such as US Fed planning to taper out its quantitative easing programme but it would be in the appreciating trajectory vis-à-vis improving domestic economic conditions. Going ahead, PHD Chamber expects CAD to fall significantly in Q3 and Q4 of 2013-14 on improving foreign trade scenario. CAD is expected at around 3.8 percent of GDP in 2013-14 compared with 4.8 percent in 2012-13.  

The progress of the monsoon has also been encouraging so far. Progress in kharif crops sowing vis-à-vis good monsoon behaviour coupled with softening global commodity prices will stabilize inflationary scenario at around 5.5 percent (average) and should pave the way for turnaround in the economic growth, going forward.

The industry growth is set to pick up in the ensuing months, supported by revival in consumer goods demand as well as improving private investments from both domestic and foreign investors. We believe the services sector scenario will improve on expansion in the services sector activities in the rural areas vis-à-vis good crop season.  Overall economic scenario is expected to turnaround in the coming quarters with real GDP growth scaling somewhere between 5.5-6 percent, in our view.