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Hardik Lodha: Presented by

The document discusses the recent depreciation of the Indian rupee against the US dollar. It notes that increased imports have led to a widening trade deficit and spike in dollar demand. Investor risk aversion due to recession in developed economies and concerns in Europe have resulted in the dollar being viewed as a safe currency. While the current situation shares some similarities to 2008, this time the problems are more profound globally and investors exhibit greater risk aversion. The RBI can take measures like raising policy rates, using forex reserves, easing capital controls, and administrative steps to address the falling rupee.

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Hardik Lodha
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57 views

Hardik Lodha: Presented by

The document discusses the recent depreciation of the Indian rupee against the US dollar. It notes that increased imports have led to a widening trade deficit and spike in dollar demand. Investor risk aversion due to recession in developed economies and concerns in Europe have resulted in the dollar being viewed as a safe currency. While the current situation shares some similarities to 2008, this time the problems are more profound globally and investors exhibit greater risk aversion. The RBI can take measures like raising policy rates, using forex reserves, easing capital controls, and administrative steps to address the falling rupee.

Uploaded by

Hardik Lodha
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Presented By

Hardik Lodha

Deprecation Of Rupee
More and more

rupees are brought in our country and

dollars are sold

More and more

rupees are sold and dollars are brought

Recession in developed economies like US made big institutions to pull out their money from India

Default concerns of European nations has resulted in loss of confidence in the Euro and appreciation of dollar

The fear of bubble bursting in gold has resulted in investors viewing dollar as a safe currency

Trade deficit has widened by 40,000 crores in the last quarter. This has resulted in increased imports and spike in dollar demand

Expecting current account deficit to settle at 3.0-3.1% of GDP by Mar 2012

Impact
Exports

Depreciation In Rupee
Inflation Interest Rates

Fixed Income
Growth Jobs

FY12 Estimates
Imports>Exports $470bn>$320bn -$150bn Trade Deficit +$90bn Service Revenue -$60bn Net Deficit

Q> In 2008, we saw a drastic Rupee Devaluation against the USD. Is the current scenario similar?
A> No. Last time around, the devaluation was driven mainly by rise in oil prices. The price of oil reached USD 147 per barrel and was one of the key contributing factors. However, risk aversion was also a part which affected the value of the Indian Rupee.

Q> Has the Risk Aversion among the Investor Public changed when we compare the times in 2008 to now? A> The concept of risk aversion is the same. But, the current situation is much more riskier. Back then, the problem was due to debt problems in US. Right now, the problem is more profound and markets world-over are in a crisis. So, people are much more risk averse than what they were in 2008.

Q> If investors take out their investment from European countries to invest in US, would it have any effect on the exchange rate of rupee?
A> Not much. Only the US Dollar investments made in India will affect the exchange value between US Dollar and Indian Rupee. US Dollar investment in Europe will not affect the exchange rate in India.

Q> What can the RBI do?

A> Raise policy rates A> Use FOREX reserves A> Ease capital controls A> Administrative measures

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