HOME > BUSINESS > Modi Government could face Rupee problems as foreign inflows double – report

Modi Government could face Rupee problems as foreign inflows double – report

Riding on huge expectations from the incoming Modi Government, global investors are gung ho on the Indian economy which is expected to see a doubling of foreign investment inflows- including FDI and FIIs- to above USD 60 billion in the current financial year than about USD 29 billion in the fiscal 2013-14, an ASSOCHAM study has projected.

“In a way, the emerging situation will pose a new challenge to the Reserve Bank of India to deal with the problem of plenty on its impact on the Rupee rate and inflation from the increased amount of cash into the system,” it said.

The Indian rupee has already gained about 6% this year and is trading at about 58 to the dollar. Further increases would dent the competitiveness of India’s exports in foreign markets.

India exports textiles, handicrafts, fruits and several other items to markets like the US and Europe. India also exports about $100 billion worth of services, such as BPO and IT services, which could all be impacted by a sharp rise in rupee’s value. On the other side, the price of petrol could fall.

Assocham said the new Finance Minister and the RBI will have to be on the same page in dealing with this scenario which will see strengthening of Rupee and a further improvement on the current account balance. The ‘problem of plenty’ will force RBI to sterilise the inflows by injecting cash into the system, it said.

“The first immediate remedy to deal with the issue would be to straight away remove import restrictions and customs duty on imports of gold as these measures were taken in an extra-ordinary situation that is behind us. Besides, the curbs on gold imports have hit the gems and jewellery trade and industry badly. The step could be taken in the first Budget of the Modi Government and will be seen as a people-friendly measure,” the paper said.

“The net foreign investment inflows, led by aggressive foreign institutional investors (FIIs) in the Indian equity and debt markets in 2014-15 , are expected to even overtake the figure of USD 46.17 billion during fiscal 2012-13, one of the best years for overseas investment inflows,” according to the ASSOCHAM paper: Global Investors’ Expectations from New Indian Government. In the FY, 2012-13, the FII inflows had led the table with USD 27.58 billion while the net foreign direct investment (FDI) had aggregated to USD 19.82 billion.

“The unfolding scenario also points to easing of prices and lowering of interest rates, the two major challenges that the Indian economy had been facing for some years now,” ASSOCHAM President Mr Rana Kapoor said.

In the current fiscal as well, the FII investment would remain more than the FDI inflows. The expectations are that the FII investment in both debt and equity could exceed USD 35 billion while the FDI money could be above USD 25 billion.

“If the Modi Government is able to take some reforms friendly measures along with taming inflation and earning goodwill of the people, the FDI will do a fast catch-up with the FIIs. Typically, since the FDIs are long-term commitments, there would be a lag, the paper noted.

Significantly, India will continue to outpace all other emerging economies in terms of FII inflows which would not be affected much by the tapering of the Quantitative Easing by the US Federal Reserve, excepting some minor jerks.

On the other hand, as the new government goes about removing obstacles in new investment and eases the process of investment, the FDI is likely to pick up again in the key infrastructure areas of ports, airports, roads and energy.

Besides, the new Finance Minister is expected to assure the global investors that the government would not resort to retrospective taxes while the policy issues stuck in courts and tribunals are expected to smoothen out.

“The euphoria must be taken advantage of and things will move on from there,” said Mr Kapoor.

Follow ULTRA.news
Expecting waivers, farmers stop paying back bank loans? The write-off of farm loans in Uttar Pradesh and Maharashtra seems to be encouraging farmers in other states to stop paying back their farm loans to make sure that they will get the benefits of any farm loan waiver program in their state. This has led to a sharp increase in farm ...
IT companies using illegal tactics to force workers to resign: FITE The Forum for IT Employees, arguably the IT workers rights organization with the largest number of well-wishers and supporters, accused IT companies of using illegal and unethical means to force their workers to submit their resignations.In a meeting with Maharashtra Chief Mi...
Demonetization took India forward by 3 years – SBI The demonetization of currency notes late last year has doubled the number of card transactions and helped push India's payment digitisation by three years, State Bank of India said in a note."Even after seven months post demonetization, the transaction value is quite large ...
Rupee to head towards 65.30 vs dollar in coming days – Angel Broking The Indian rupee is likely to give up some of the gains it has made in recent weeks going forward, Angel Broking said, adding that the currency is likely to move towards the 65.30 level against the US dollar.The rupee has risen around 5% in the last six months due to various ...
Raymond opens Ethiopia factory to cut costs, easy access to US, EU Textiles and garments brand Raymond inaugurated a garment manufacturing plant in Ethiopia to gain duty-free access to the US and European markets.The plant was set up at a cost of Rs 100 cr and will employ over 2500 people in the first phase. More people will join later, the...
Indian IT industry facing layoffs as conditions worsen, warns Assocham Trump unveiled his 'Buy American, Hire American' program yesterdayIndian IT companies are bound to see "some laying off" of their work force back home due to various negative forces impacting the industry, Assocham -- an association of various industries -- warned."With ...
Rs 1.7 lakh cr deposited via demonetization may not be withdrawn – SBI Monthly cash withdrawals for all banks | source:SBI ResearchThe Indian banking system is likely to get a permanent liquidity boost of Rs 1.7 lakh cr due to the demonetization of high-denomination bank notes, State Bank of India chief economic adviser said in a note to bank c...
Apparel exporters bemoan rising rupee, seek support Apparel manufacturing is a big job creator in Tamil NaduIndian apparel makers have sought government intervention to stabilize the rupee, which has been rising in recent months, in stark contrast to the situation in other countries that compete with India in exporting garmen...
After missing twice, India comfortably meets power sector targets for 12th five-year plan After missing its targets by wide margins in the previous two five-year plans, India is all set to comfortably meet or exceed all its power sector targets for the 12th five-year plan that ends this month.Five-year plans, borrowed from the Soviet Union, are a legacy of Nehruvi...
Wholesale price inflation hits 3-year high on high diesel prices High fuel prices, particularly that of diesel, lifted India's wholesale price index to its highest level since the Narendra Modi government took power almost three years ago.On an overall level, wholesale price of various items jumped 6.55% in February when compared with ...
No immediate plans for universal basic income: Indian Government India's welfare budget, 2016-17The Indian government has no immediate plans or proposals to institute a scheme of 'unversal basic income' in place of the myriad social welfare scheme run by the country at present, the finance ministry said in response to a query.The clar...
Gadkari to miss ambitious highway target for 2016-17 Nitin Gadkari, who is slowly building up a reputation as a pragmatic and capable minister, is likely to face major disappointment in the ongoing financial year as his ministry is unlikely to meet the steep road construction target it set for itself.Unlike the term of the ...
Venture Capital firms seek validation for Modi’s policies in UP election BJP leader Uma Bharti at an election rallyPrivate equity and venture capital firms are largely bullish on India in the context of big economic reforms, but are awaiting the results of the ongoing Uttar Pradesh elections to assess the level of popular support that such polici...
DEMONETIZATION: SBI sees GDP growth fall to 6.1%, miss govt projection of 7% The country's largest bank, State Bank of India, said today that it expects the growth in India's gross domestic product to fall to 6.1% or lower in the current year from 7.9% last year due to the impact of demonetization.It said the projection by government of India's Centra...
Demonetization: Modi announces bumper prizes; 15 lakh users to get 1,000 rupees Narendra Modi announced several 'prize schemes' to promote cashless transactions.Under the schemes announced today, there will be two sets of prizes for consumers and another for small merchants.Under the first scheme, any customer who uses any electronic form of payment,...
DEMONETIZATION: Wholesale Price Inflation falls to 3.15% in November The annual rate of inflation, based on monthly WPI, stood at 3.15% for the month of November, 2016 as compared to 3.39% for the previous month and -2.04% during the corresponding month of the previous year.The fall is largely expected due to the impact of the withdrawal of h...
Petrol Pumps, Airlines Will Not Take Old Notes From Saturday | DEMONETIZATION Old notes will no longer be accepted at petrol pumps and airline ticket counters starting from Saturday, according to sources.So far, petrol pumps and airlines had been given an exemption from demonetization of 500 and 1000 rupee notes.However, in an effort to control...
Fitch revises US growth estimates on Trump election, says protectionism to rise The surge in populism and anti-establishment sentiment witnessed in the Brexit vote and Donald Trump's victory in the US presidential election seem likely to push structural policies in the direction of economic nationalism, said Fitch Ratings in its latest global economic outloo...
DEMONETIZATION: How some earned lakhs standing in queues The government has banned over-the-counter exchange of old 500- and 1000-rupee notes due to suspected gaming of the system by those with black money. According to banking industry sources, the over-the-counter exchange system was being massively misused by hawala operators and ot...
Despite Demonetization, India will beat China in GDP growth: Fitch Ratings Despite a moderation in India's GDP growth rate in the short term due to cash crunch, the Indian economy will still grow faster than that of China, global ratings agency Fitch said."We still expect India’s GDP growth to trend higher than China’s in the medium term," said the ...
Fitch says demonetization gains may not last Fitch Ratings said the positive effects are unlikely to be strong and sufficiently enduring "to support credit profiles" and will impact GDP growth in the current quarter.Though the gains will be substantial in the short-term, they may not last as people may still go back...
Hiring slows in October due to festival effect – Naukri.com Hiring activity fell 8% October this year compared to the same month a year ago, according to Naukri.com's Job Speak Index.This dip was primarily caused by the festive season which saw Dussehra, Durga Pooja and Diwali fall in October, the company said. "Hiring activity ge...
Infosys invests Rs 14.5 cr in Danish artificial intelligence startup UNSILO Technology services provider Infosys said it made an investment of 14.92 mln Danish kroners in Danish startup UNSILO from its innovation fund.UNSILO is a Danish artificial intelligence startup founded in 2012 and focus on advanced text analysis.It uses a combination of m...
RBI chests have enough cash – ICICI Bank CEO ICICI Bank Chief Executive Officer Chanda Kocchar today said the Reserve Bank of India's currency chests have enough cash and there is no situation of scarcity for banks in securing notes.Kocchar also said that all banks including hers are bringing more and more ATMs into wo...
Infosys invests TidalScale, provider of simple supercomputing software Technology provider Infosys said it made investment in TidalScale, a provider of software-defined server.No details about the financial aspects of the investment were made public.TidalScale's offering, in many ways, is the opposite of virtualization. While virtualizat...