Experts say rupee might fall further

Hyderabad: The latest turmoil in the country’s forex market is creating ripples in business circles as the fall of the rupee against the dollar to an all-time low will fuel input costs across the board.

CII Telangana chapter chairman Sanjay Singh says, “The rupee fall is not good for the country. Everything will become expensive. India is a net importing nation. Oil prices are on the rise. This coupled with rupee fall will increase input cost for every industrial vertical. Unfortunately, it’s happening when our economy is picking up. I don’t think government will allow free fall of the rupee. We are meeting on July 6 to discuss the impact and measures to be taken in the wake of rupee fall and oil price surge.”

After strengthening 5.96 per cent in 2017, the Indian rupee has been sliding against the US dollar since April this year. Indicating its all-time low, the home currency on June 28, 2018, touched 69.09 per US dollar. The rupee fell eight per cent in 2018. Experts say this was due to high crude oil prices and weak macro-economic fundamentals. The rupee’s last record low was 68.87 per dollar, on November 24, 2016.

Prof K.V. Subramanian at ISB, Hyderabad, said “RBI can intervene to some extent. Forex is such a deep market no one can trace it or predict exactly. Crude oil price surge is impacting our import bill, widening current account deficit.”

Meanwhile, global rating agencies and financial institutions are predicting further fall in the rupee. Barclay’s forecasts the rupee may hit 72 against the US dollar. Ms Ranade thinks it could slip to 75 before 2019 elections.

Ms Ranade added “My point is not about the INR sliding against the dollar. My point is about it not sliding to the extent desirable and Modiji’s obsession preventing RBI from fully sanitising the supply effect of borrowed dollars. The first major overhead resistance for WTI crude from current price is $80. We will almost certainly hit that level by November. Expect a range of $80 to $65 for most of 2019. The problem is Brent. If sanctions on Iran take hold, as (US President) Trump has decreed, we could see the premium on Brent to shoot to $12-15 range, taking the oil price to $92-95 range. Brent could be about 60 per cent of India’s crude import basket if not more.”

Prof Subramanian said: “Crude oil prices are rising as growth is picking up in many countries creating more demand for oil. $40/bbl may not happen, and I don’t foresee $100/bbl as well. The US dollar is appreciating against the rupee. Protectionism is taking place across the world. No government has the ability to intervene too much as it has no role to play. The government can only express its wish, but RBI can do the job on its own.”