Falling Rupee shatters sentiment, Fear of FDI pull out looms large

Indian experts are predicting that downfall of rupee will continue and the problem is likely to intensify further in the coming months.


If the experts are to be believed the situation is not likely to resolve until Lok Sabha elections
, due in 2014, are over.

Major factor responsible for the weakening of rupee is the immense strengthening of dollar Index. The US economy has shown signs of boosting up of the US labour markets, well outperforming bonds, commodities, and global equities in the first half of 2013.


Indian Economist Dr  J D Agarwal, Director of Indian Institute of Finance  said "If you want to stop the Rupee downfall then change in leadership is  important and the crucial measures taken by the UPA  government and the Reserve Bank  to improve the macro-economic sentiment and arrest the fall of rupee have not yielded any results but instead  will make the situation worse. "




"Foremost reason for the downfall of Rupee is that foreign investors are not coming to India and are taking away their money. The investors are looking for stable policies, faster project approvals and a turnaround in the economy and which is not happening at all." Dr Alok Puranik, Associate Professor in Economics, Delhi University.




Further elaborating, Alok said, "secondly imports cannot be stopped and there is a wide gap between import and exports."

Indian business environment not conducive

Comparing the prevailing business enviornment in India and other countries, Alok said, "Companies are also pulling out from India, for instance, Nokia is shifting its office base from Chennai to Vietnam as the business environment is not so conducive here."

The pullout from India has led to fresh concerns about the country's ability to attract FDI (Foreign Direct Investment) and reinforces India's reputation as a tough place to do business.

"A risk is something companies can factor in, but uncertainty where you have changing goal posts, or when you can't predict any outcome for anything, that is the major hassle that the foreign investors face in India," Alok said.



West policies are anti emerging market economies:Dr JD Agarwal

While Dr JD Agarwal, Director of Indian Insitutte of Finance said during an exclusive , "it is very difficult to stop the Rupee downfall at this juncture   and  developed nations like West  is also devising policies which are anti to the policies of developing countries. Morover World institutions like World Bank and IMF (International  Montary Fund)  will give loans to developing countries and  they will have to pay more to these institutions like with a rupee downfall the payback grants will be doubled."

"Secondly, developed nations will sell the high tech military  arms , ammunitions to developing countries  that will amount to higher cost in the domestic currency ,thus creating a national crisis."Indian economist Dr Agarwal said.



The dollar surged against counterparts worldwide ranging from Australia’s currency to Turkey’s lira as the Federal Reserve’s signal it is getting closer to reducing monetary stimulus and spurred losses in carry trades.

India  among leaders for carry losses among the 31 most-traded currencies versus the dollar


The U.S. currency strengthened versus a majority of its 16-most-traded peers and Deutsche Bank as Fed Chairman Ben S. Bernanke outlined the case for reduced monetary stimulus this year if the U.S. economy keeps improving. India is among leaders for carry losses among the 31 most-traded currencies versus the dollar this month.




Indian economist Dr Alok said, "US economy is growing  because of  improvement in the US equities and the improvement in the labour market and  thus Americans  have  become more optimistic about the outlook for the US economy, thereby spurring greater hopes of QE tapering".

With the strengthening of US economy foreign investments in India have begun to fly out of the country and the debt markets. The strong demand for the dollar vis-à-vis the rupee led to fall of Indian rupee.



India's problems are nowhere near resolution because New Delhi has not done anything - there is no focus on improving productivity, infrastructure or getting FDI (foreign direct investment) back," said Nomura credit analyst Pradeep Mohinani in Hong Kong.

Since last year the Fed has made improving labour markets the central focus of its policies. Fed members have repeatedly stressed that tapering the central bank’s bond buying program won’t begin until policy makers are confident the job market has gathered sustained momentum.

Atlanta Federal Reserve President Dennis Lockhart said, “U.S. economy would gain momentum in the second half of 2013 and continue to pick up steam in 2014.”

While Dr J D Agarwal contradicts that US economy is  growing," US claims that American economy is growing but it is not it is artificially created  to pump  more money from emerging market economies."

Last year, foreign direct investment in India fell to about $26 billion - down by nearly one third compared to the previous year. 

The plummeting investment has prompted the government to announce more reforms to lure investors. The government decided in mid-July to ease ownership restrictions on several industries, including telecommunications.  

Economists say these steps alone are unlikely to attract foreign investors. They point out that although the government relaxed barriers to foreign investment in retail, insurance and aviation sectors last year, hardly any investment has come in.

India to miss Asian century


India is set to miss out on the Asian century, claims Hedge fund manager Jim Rogers,the chairman of Rogers Holdings said in his just-released book ‘Street Smarts: Adventures on the Road and in the Market’ said India is the worst country to do business in.

Rogers , who moved to Singapore in 2007 because he thought the centre of the world is shifting to Asia.




Experts have warned of the possibility of “currency wars” as countries sought to devalue their exchange rates to gain competitive advantage.


The Great Depression of the 1930s provides  ample warnings as that  prompted competitive depreciation and trade conflict as countries sought to gain demand by increasing exports and decreasing imports.

The Federal Reserve is set to get a new chair in early 2014 as Ben Bernanke is expected to step down at the end of his second full term as chairman of the Federal Reserve and there is already rampant speculation as to who will be his successor.


Current Federal Reserve Chairman Ben Bernanke has endured some of the most difficult economic times in modern history, having presided over financial disaster and the Great Recession.




“A critical part” of the next Fed chairman’s job “is making sure that we keep inflation in check,” President Barack Obama said at an Aug. 9 White House news conference. He also reiterated that Bernanke’s successor must continue trying to reduce unemployment, as “the challenge is we’ve still got too many people out of work.”