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Economy

Rescuing the rupee: Government announces measures on capital account & CAD

Updated : September 17, 2018 07:55 AM IST

As the government battles a falling rupee and rising fuel prices, the Prime Minister's Economic Review meeting is scheduled later this evening. Ahead of that crucial meet- the government has announced five steps aimed at bringing in the much needed dollar inflows. At the heart of Friday's measures, is an intent to increase foreign capital inflows, by removing some irritants and impediments and signalling that India is open to foreign investment. Authorities believe that the measures are likely to bring in $ 8-10 billion over time.

Keki Mistry, vice chairman and CEO of HDFC, Nilesh Shah of Kotak AMC, Ananth Narayan, professor at SP Jain Institute of Management and Research and Jayesh Mehta, MD and Country Treasurer at Bank of America discussed what this means for the equity and money markets.

“I think these are all positive measures. A little more perhaps have been done but whatever has been done, by itself is a very positive measure. I don’t think these measures will help immediately but in the medium-term to long-term, it will definitely help,” said Mistry.

“I completely agree with Keki Mistry that these are measures, which will kind of stabilise the rupee only if we take other supplementary measures. Just to expand on what Mr Mistry was saying, clearly we have three problems in relation to fx outflows. One is oil, we have spent about $ 110 billion on an average over last 10 years in terms of oil import. Second one is gold import, which we have reduced substantially but it is still large and the third one is electronic imports,” Shah added.

Jayesh Mehta further mentioned that, “They are not showing too much of panic, they have put on enablers and I think they are looking at it. So I think that is a good message rather than doing a panic reaction which was not required at this juncture because a lot of people were expecting immediate, great monetary measures and stuff like that which does not really help India as such on currency.”

Pointers

Keki Mistry

These Are Very Positive Measures But I Wish More Was Done
These Steps Won’t Help Immediately; Will Help In Medium-Long Run
Some More Tweaking With Masala Bond Rules Could Have Made It More Palatable
Shorter Tenure & Automatic Approval For Masala Bonds Needed
Some More Minor Tweaking In ECB Rules Should Have Been Done
These Measures By Themselves Won't Make Much Difference
Govt Will Have To Supplement These Measures With More Action
Govt Should Look At Strengthening The Trade Balance
Would Expect More Measures From The Govt Soon

Am Sure Than RBI Will Consider Taking Oil Demand Off The Market

Jayesh Mehta, Bk Of America Says

Govt's Measures Are An 'Enabler', Shows Govt Not Pressing Panic Button
$ Strength Is Still Likely To Continue Affecting India Like Other EMs
Need To Drive 'Make In India' By Imposing Tariffs On Imports

Don't Expect A Concrete Policy Today But May See Intention To Curb Imports

Nilesh Shah, Kotak AMC

We Need To Reduce Our Trade Deficit With China
There Are Many Items Imported From China, Would Be Better To Mfg In India

We Have A Large Domestic Mkt That Cambodia, Thailand, Vietnam Don't Have

Ananth Narayan

The Measures Announced By Govt Last Night Are Not 'Earth-shattering'
Need Controls In The Areas Of Gold & Electronics
Do See Dollar-Rupee Called At The `72/$ Level
Extra Tariffs On Electronics Could Be A Double-edged Sword
Hope In The Long Term, 'Make In India', Infra Dvpt Take Over Short Term Steps
Do Believe The RBI Should Be Cautious With Respect To Rates
Inflation At This Level As Food Prices Are Soft, Not Because Core Infln LowHave To Be Cautious, Austere & Focus On Bringing Down The Twin Deficits
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