India’s central bank to increase efforts to “save” rupee crisis

India’s central bank

rupee plummeted and capital outflows are the India’s economy to more than 20 the biggest crisis. Wednesday, India had once again increased the response.

late Wednesday, India’s central bank issued a statement to tighten overseas investment restrictions, requiring domestic enterprises in the case without the approval may be made to the largest overseas investment can not exceed 100% of the net assets, Previously prescribed limit of 400%. Meanwhile, India’s central bank will limit residents to overseas remittances from $ 200,000 per fiscal reduced to $ 75,000.

impact statement by the Reserve Bank of India, on Wednesday, the rupee against the dollar, one of the offshore non-deliverable forward rate rose 0.2 percent to 61.83 rupees, up for the first time in three days.

In addition, to reduce the pressure on rupee, the Indian government on Tuesday has again raised import duties on gold and silver. India’s gold imports tariff rate from 8% to 10%, the silver import tariff rate from 6% to 10%.

rupees from May onwards accelerated depreciation due to concerns about the Fed QE reduction makes the foreign investors who have from the Indian bond and stock divestment. Since 2013, the rupee against the dollar plummeted by 10%. Over the past two years, the Indian rupee has depreciated by about 28%, which is the 1991 Indian government is committed to secure loans from the IMF gold reserves, the largest decline since. The beginning of the last century, 90 generations, since the budget deficit and the current account deficit continued to widen, the Indian rupee depreciated at 37 per cent between 1991-1992. Indian government in order to obtain the $ 2.2 billion IMF emergency loans committed to 67 tons of gold reserves as collateral. India’s economic growth in 1991 also formerly a significant slowdown from 5.6% to 2.1%.

since seven years, policy makers have taken steps to tighten the supply of cash, restricted currency derivatives and inhibition of gold imports, but these failed to prevent the rupee plummeted. Rupee exchange rates in this 86 day hit its lowest level ever, the rupee against the U.S. dollar fell 0.4 percent to 61.11 rupees per dollar.

India’s central bank governor Duvvuri Subbarao 715 days had raised the two interest rates and restricted to inject liquidity into the banking system, joined Brazil, Indonesia and other countries against currency devaluation queue.

India’s central bank kept its benchmark 730 day repo rate unchanged at 7.25 percent. But it also said it will re-stabilize the money market after the recent withdrawal of liquidity tightening measures to support the economy. But the bank while the 2013 to 2014 fiscal GDP growth forecast raised to feed about 5.5% previously expected growth of 5.7%. The bank also said that if not for from trade imbalances and the risk of weakening rupee, India will support the current situation should provide ongoing policy easing. This means that India’s central bank may now be more worried about the macroeconomic stability, and if tightening last longer, or at some point in the future harm economic growth.

June 27, 2020 3:37 am