Rupee to stabilize in another six months

22 June, 2012

Continuing its depreciating trend against the US dollar, the Indian rupee crossed the mark of 57. The partially convertible rupee was at 57.03/57.05 per dollar, after hitting a record low at 57.04.

>THE DOWNFALL in rupee was attributed to sustained capital outflows and strong demand for the dollar from the country's oil and gold importers. DH Pai Panandiker, President of RPG Foundation, a private think tank, expects that in another six months rupee will stabilize at around 54-55.

In another six months the rupee will stabilize to the level of 54-55,” said DH Pai Panandiker to this Citizen Journalist .

Experts are of the view that the rupee will depreciate to the level of 60 against a dollar. To curb the decline they have suggested that the government should take immediate steps towards economic reforms to woo foreign investors.

The declining rupee is adding to the woes of consumers who are already facing the heat of high inflation rate. The downfall in the Indian currency is also a big cause of concern for the importers who have to pay more for their purchasing and in return passing the burden on the consumers.

The Indian currency has depreciated more than 10 per cent since the start of April 2012. India's central bank the Reserve Bank of India, unlike the wide expectation did not change the existing key interest rates i.e. repo and reverse repo rates. It is said that this step has dampened the mood of investors that in turn has put more pressure on the Indian currency.

The most likely reasons that are being given for rupee depreciation are rising inflation, slowing economy, high current account deficit and high fiscal deficit.

According to media reports, RBI has written to oil marketing companies to buy 50 per cent of their dollar needs from public sector lender SBI in a bid to curb the currency's free fall against dollar.