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Indian Rupee dives a new record low against dollar

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@Nilgiri, is this something to worry about?
You buddy, is an economic expert. Pls share your thoughts.

INR is depreciating largely only against USD (And of course all those pegged to USD like CNY, SGD etc). All other (floating or loose peg) major currencies it is more or less stable (i.e they are depreciating against USD at roughly same rate). Currencies such as GBP, EUR, JPY, CAD, CHF etc.

This indicates that it is really a case of USD strengthening against everyone (as to why is another detailed analysis heh, though I mention a bit later on here).

I would be worried if INR was the only one depreciating basically (as that would indicate the problem is within India) i.e that its depreciating against every major world currency. But that is not what's happening here.

That said, the major external payment types that India makes which are quite inelastic are:
a) oil/energy imports
b) loan service/repayment.
c) other inelastic goods (raw materials and inputs which India has little or no capacity to produce locally in relation to their demand)...things like OEM components for electronics etc.
d) Capital outflow

These present their own set of challenges to manage (from govt standpoint), but the good news is that GST is now working better and better (especially if you look at the warehousing numbers, IIP, PMI and various logistic indices).

Also the internal situation of the economy is looking better than before, the new bankruptcy resolution court is doing its job more and more (helping to expose the bad loans and getting them resettled so that re-capitalisation can take place) and the consumer demand is steady and increasing. This has led to finally the investment % (Gross capital formation) to increase again (as % of GDP).

Essentially the free market must be allowed to operate as much as it can (even in foreign trade/investment). The depreciation of the rupee puts more pressure on elastic imports (which can be transferred more readily to local production) and also makes Indian exports cheaper (not only goods, but services too). This will create rebound effect down the road as far as raw exchange rate with USD goes....my prediction is INR stabilises somewhere around 75 - 80 per USD and then will reclaim value later when the US stock market and economic expansion dynamics stabilise more. More rupees per dollar also tends to increase foreign investment (FDI)....and the reforms regarding this from India only continue each year....however the trends regarding capital outflow (point d) need to be looked into thoroughly (it is a trend that has started now for last cpl quarters especially). From what I have seen it seems to be mid-cap and short-cap mostly (i.e largely volatile "hot" money based) rather than equity and long-cap (cold hard money)....so it shouldn't be too much of an issue esp given Indian forex reserves are quite large and stable.

In the interim its a good opportunity for India to push and set floorboards underneath its export sector....and also push for more energy independence. Photovoltaic imports and local production helps, increase in oil storage capacity helps and also recently Indian oil companies signed for continued import of Iranian oil past the USD sanctions kicking in (likely it will be rupee - oil and then rupee used by Iran for Indian imports + currency exchanging as needed.) Let us see!

@AUSTERLITZ @That Guy @Chak Bamu @anant_s @MilSpec @django @Chinese-Dragon @Gibbs

@VCheng @Desert Fox @LeGenD @Hamartia Antidote @jhungary @Viet
 
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INR is depreciating largely only against USD (And of course all those pegged to USD like CNY, SGD etc). All other (floating or loose peg) major currencies it is more or less stable (i.e they are depreciating against USD at roughly same rate). Currencies such as GBP, EUR, JPY, CAD, CHF etc.

This indicates that it is really a case of USD strengthening against everyone (as to why is another detailed analysis heh, though I mention a bit later on here).

I would be worried if INR was the only one depreciating basically (as that would indicate the problem is within India) i.e that its depreciating against every major world currency. But that is not what's happening here.

That said, the major external payment types that India makes which are quite inelastic are:
a) oil/energy imports
b) loan service/repayment.
c) other inelastic goods (raw materials and inputs which India has little or no capacity to produce locally in relation to their demand)...things like OEM components for electronics etc.
d) Capital outflow

These present their own set of challenges to manage (from govt standpoint), but the good news is that GST is now working better and better (especially if you look at the warehousing numbers, IIP, PMI and various logistic indices).

Also the internal situation of the economy is looking better than before, the new bankruptcy resolution court is doing its job more and more (helping to expose the bad loans and getting them resettled so that re-capitalisation can take place) and the consumer demand is steady and increasing. This has led to finally the investment % (Gross capital formation) to increase again (as % of GDP).

Essentially the free market must be allowed to operate as much as it can (even in foreign trade/investment). The depreciation of the rupee puts more pressure on elastic imports (which can be transferred more readily to local production) and also makes Indian exports cheaper (not only goods, but services too). This will create rebound effect down the road as far as raw exchange rate with USD goes....my prediction is INR stabilises somewhere around 75 - 80 per USD and then will reclaim value later when the US stock market and economic expansion dynamics stabilise more. More rupees per dollar also tends to increase foreign investment (FDI)....and the reforms regarding this from India only continue each year....however the trends regarding capital outflow (point d) need to be looked into thoroughly (it is a trend that has started now for last cpl quarters especially). From what I have seen it seems to be mid-cap and short-cap mostly (i.e largely volatile "hot" money based) rather than equity and long-cap (cold hard money)....so it shouldn't be too much of an issue esp given Indian forex reserves are quite large and stable.

In the interim its a good opportunity for India to push and set floorboards underneath its export sector....and also push for more energy independence. Photovoltaic imports and local production helps, increase in oil storage capacity helps and also recently Indian oil companies signed for continued import of Iranian oil past the USD sanctions kicking in (likely it will be rupee - oil and then rupee used by Iran for Indian imports + currency exchanging as needed.) Let us see!

@AUSTERLITZ @That Guy @Chak Bamu @anant_s @MilSpec @django @Chinese-Dragon @Gibbs

@VCheng @Desert Fox @LeGenD @Hamartia Antidote @jhungary @Viet
India forex is $400 billion, a figure most countries can only dream of. India weakness is temporary, largely due to strong dollar, high oil price and trade deficit. The last can be reduced if India increases trades with Vietnam and reduces buying stuffs from high priced countries.
 
I don't subscribe to doom and gloom that this thread has developed into.

HOWEVER, it's ironic, Trump the saviour of Hindus, is largely responsible for currency woes in India and higher oil prices. Thanks :usflag::welcome:
 
@Nilgiri your post is bias and it showing the same narrative your media propagating for past so many years and now that the actual facts are surfacing you are making one last try to achieve the same old narrative. INR is not only depreciating against USD but also UAE dirham which is source of remittance for India so it is a real problem and a bad economic situation for India you have been following this whole thread and it clearly show the decline of Indian rupee adjacent to Indian markets reserves and deficit. You need a better theory bro to save face.

 
I don't subscribe to doom and gloom that this thread has developed into.

HOWEVER, it's ironic, Trump the saviour of Hindus, is largely responsible for currency woes in India and higher oil prices. Thanks :usflag::welcome:

Trump has actually squeezed on OPEC to increase production and reduce crude costs.

Trump improving US economy domestically (and thus USD strengthening) is a long term benefit for India (given we can export more there and also gain more investment flow into India - weaker rupee encourages both). Again we have more than enough forex and buffer space for any interest rate hike that may be needed for CAD situation (as analysed through the balance from the domestic side - as RBI gov points out when he didnt hike them this time).

Many people here seem to not realise that changes in market forces always create counter pressures to restore equilibrium point again (be it external market or internal market). It is a good thing.
 
INR is depreciating largely only against USD (And of course all those pegged to USD like CNY, SGD etc). All other (floating or loose peg) major currencies it is more or less stable (i.e they are depreciating against USD at roughly same rate). Currencies such as GBP, EUR, JPY, CAD, CHF etc.

This indicates that it is really a case of USD strengthening against everyone (as to why is another detailed analysis heh, though I mention a bit later on here).

I would be worried if INR was the only one depreciating basically (as that would indicate the problem is within India) i.e that its depreciating against every major world currency. But that is not what's happening here.

That said, the major external payment types that India makes which are quite inelastic are:
a) oil/energy imports
b) loan service/repayment.
c) other inelastic goods (raw materials and inputs which India has little or no capacity to produce locally in relation to their demand)...things like OEM components for electronics etc.
d) Capital outflow

These present their own set of challenges to manage (from govt standpoint), but the good news is that GST is now working better and better (especially if you look at the warehousing numbers, IIP, PMI and various logistic indices).

Also the internal situation of the economy is looking better than before, the new bankruptcy resolution court is doing its job more and more (helping to expose the bad loans and getting them resettled so that re-capitalisation can take place) and the consumer demand is steady and increasing. This has led to finally the investment % (Gross capital formation) to increase again (as % of GDP).

Essentially the free market must be allowed to operate as much as it can (even in foreign trade/investment). The depreciation of the rupee puts more pressure on elastic imports (which can be transferred more readily to local production) and also makes Indian exports cheaper (not only goods, but services too). This will create rebound effect down the road as far as raw exchange rate with USD goes....my prediction is INR stabilises somewhere around 75 - 80 per USD and then will reclaim value later when the US stock market and economic expansion dynamics stabilise more. More rupees per dollar also tends to increase foreign investment (FDI)....and the reforms regarding this from India only continue each year....however the trends regarding capital outflow (point d) need to be looked into thoroughly (it is a trend that has started now for last cpl quarters especially). From what I have seen it seems to be mid-cap and short-cap mostly (i.e largely volatile "hot" money based) rather than equity and long-cap (cold hard money)....so it shouldn't be too much of an issue esp given Indian forex reserves are quite large and stable.

In the interim its a good opportunity for India to push and set floorboards underneath its export sector....and also push for more energy independence. Photovoltaic imports and local production helps, increase in oil storage capacity helps and also recently Indian oil companies signed for continued import of Iranian oil past the USD sanctions kicking in (likely it will be rupee - oil and then rupee used by Iran for Indian imports + currency exchanging as needed.) Let us see!

@AUSTERLITZ @That Guy @Chak Bamu @anant_s @MilSpec @django @Chinese-Dragon @Gibbs

@VCheng @Desert Fox @LeGenD @Hamartia Antidote @jhungary @Viet
@Chinese-Dragon, when are you gonna give me a positive rating? I've been running short of it. ;)
 
This is indeed very bad and very sad for Indian economy :(
 
@Nilgiri your post is bias and it showing the same narrative your media propagating for past so many years and now that the actual facts are surfacing you are making one last try to achieve the same old narrative. INR is not only depreciating against USD but also UAE dirham which is source of remittance for India so it is a real problem and a bad economic situation for India you have been following this whole thread and it clearly show the decline of Indian rupee adjacent to Indian markets reserves and deficit. You need a better theory bro to save face.


Gee UAE dirham. Yep doesnt look like a pegged currency at all:

https://www.xe.com/currencycharts/?from=AED&to=USD&view=5Y

Tell me how hard is it to maintain a peg when your export is 90% the same stuff that gives rise to the term "petrodollar"?

I am curious to the extent of your illiteracy.
 
@Chinese-Dragon, when are you gonna give me a positive rating? I've been running short of it. ;)

There are rules for when I'm allowed to give a positive rating or not. It is for posts that are particularly informative or insightful regarding a particular topic.

I.e. Don't write posts like mine. :P

Me giving @Nilgiri a positive rating doesn't mean I agree with his entire post by the way, I disagree with a few points.
 
Gee UAE dirham. Yep doesnt look like a pegged currency at all:

https://www.xe.com/currencycharts/?from=AED&to=USD&view=5Y

Tell me how hard is it to maintain a peg when your export is 90% the same stuff that gives rise to the term "petrodollar"?

I am curious to the extent of your illiteracy.
You can question my literacy all you want as I never claim to be some economist but a poor noon illiterate farmer but I think I can understand your economy better than your finance minister and you. INR falling against UAE dirham clearly shows problem with Indian economy because there is only inflow of cash from UAE to India and depreciation against UAE Dirham is an indicator that there is a problem of a great proportion with Indian economy.

Your currency is falling against a currency which is a biggest source of foreign exchange for your country means that your economy is in trouble hope your ego can digest this @Nilgiri
 
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