Indian rupee’s fall against the dollar

Neeraj Gangal
Yahoo! India News


The Indian rupee hit new record lows against the dollar – over and over again this year.  It even breached the 57/dollar mark.

Former Finance Minister, Pranab Mukherjee blamed the declines on the euro zone crisis and to the global slowdown.

But the fact remains that the Indian rupee is one of the weakest currencies in Asia and among emerging markets. This is largely because India has a high current account deficit and concerns over its flagging economy and rising inflation loom large.

The Reserve Bank of India stepped in to curb the fall - boosting the amount of its bonds that foreign investors can purchase by $5 billion.

And just when many feared a repeat of the dire situation in 1991, the government unleashed a slew of reforms that pulled back the Indian currency to an appreciating bias.

Coupled with rising capital inflows and improving global sentiment, the Indian government’s moves to cut fuel subsidies, open the gates for FDI in multi-brand retail and allowing foreign airlines to pick up stake in the domestic aviation sector seems to be strengthening the rupee.

Do we hear happy sighs from relieved importers?