Indian rupee remained one of the worst performing regional currencies in 2020, despite record inflows from foreign institutional investors (FII) and foreign portfolio investors (FPI) into Indian equities. Earlier this year in April, the Indian rupee hit a record low of 76.92 against the dollar. On a year-to-date (YTD) basis, the Indian rupee has depreciated 2.83 per cent in the year 2020, from 71.28 to 73.30 levels. On the contrary, it has appreciated 3.14 per cent, from 75.68 to 73.30 levels, so far this fiscal. According to an analyst, the fall in Indian rupee is understandable given the economic uncertainties and fall in growth rate that led to global investors rush to the greenback which is considered as a safe haven. “As we wrap up for a bumpy 2020 where rupee remained one of the worst-performing regional currencies, 2021 brings no surprises,” said Amit Pabari, managing director, CR Forex Advisors.
The depreciation in the Indian rupee has a positive impact on Indian exporters and Information Technology (IT) companies. Pabari added that the unprecedented fiscal and monetary support in the form of stimulus and lower interest rates turned a boon for 2020 to help the economy come back on a recovery road. According to him, the strains could be felt in 2021 with fiscal deficit rising to nearly 8 per cent of GDP from the budgeted 3.5 per cent, the gap shall be filled by debt and borrowings adding pressure on the USD-INR pair. Since June 2019, India’s exports have been negative for 15 of the past 17 months. “Rising inflationary pressure and RBI’s continued dollar buying intervention in heavy quantum, shall further push Indian rupee towards depreciation.
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