Global Uncertainty Impact
NEW DELHI
A new SBI Research report has said that the recent fall of the Indian rupee past the 90-per-dollar mark is not a sign of weakness in the country’s economy. The study explained that the rupee’s slide is mainly due to global uncertainty, delays in the India-US trade deal, and foreign portfolio investors pulling money out of Indian markets. It added that none of these factors reflect any real drop in India’s economic strength.
The report noted three major reasons for the rupee’s current pressure. The first is the lack of clarity on the India-US trade agreement. The second is the recent foreign outflow from Indian shares after two strong years of inflows. The third is the Reserve Bank of India’s decision to avoid too much intervention in the currency market, allowing natural movement.
SBI Research also pointed out that the offshore non-deliverable forward (NDF) market has become more active in recent weeks, while the US dollar index is gaining strength. Both developments are adding short-term pressure on the rupee.
Concerns that India’s trade deficit is pushing the currency down are overstated, the report said. Between April and October, India’s goods and services deficit stood at $78 billion, only slightly higher than $70 billion during the same period last year.
Since April 2, when the US announced steep tariff hikes on many countries, the Indian rupee has fallen by about 5.5 per cent — more than most large global currencies. India faces a 50 per cent US tariff, which is higher than those imposed on China, Vietnam, Indonesia, and Japan.
The report added that nearly $45 billion worth of Indian exports, mainly labour-heavy items, may be affected by the higher tariffs.
