Rupee beats Chidambaram to touch 68 first

K.S. Badri Narayanan
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The rupee has outsmarted Chidambaram once again by breaching the 68-mark against the US dollar. The Finance Minister, Chidambaram, has to wait another 20 days exactly to turn 68. He was born on September 16, 1945.

The domestic unit hit an all-time low of 68.75 in early trade on heavy month-end demand for dollars from banks and oil importers amid a sharp fall in the domestic equity market.

Around noon, the rupee was quoting at 68.34 against the previous close of 66.24.

Last year on August 1, 2012, Chidambaram took over the Finance portfolio once again (from Home Ministry) after the incumbent Finance Minister Pranab Mukherjee became the First Citizen of the country. Since then rupee has lost 23 per cent.

Not only against dollar, the rupee has tumbled against the euro and pound as well. In fact, against the pound it is quoting well below the 100-mark. Currently, it is hovering around 106.11 against the UK currency. Against the euro, the rupee is quoting at 91.50.

The slide in rupee and equity markets was chiefly because of the tension over Syria and fear that the Food Security Bill will further inflate the fiscal deficit. Chidambaram, however, claimed that the fiscal deficit would be contained to 4.8 per cent, as projected in the Budget.

Christopher Wood, whose weekly Greed & Fear column is widely followed, said, the Reserve Bank of India’s tightening moves in July, which seem to have been ordered from Delhi in an attempt to shore up the currency, clearly backfired in large part because of misguided communication and conflicting signals.

There have also been over the past week and more retrograde steps to impose restrictions on residents’ capital outflow. Thus, the limit for outward remittances was lowered from $200,000 to $75,000 per financial year. The result has been a further loss of investor confidence and a further decline in the currency.

"The result is that India remains the Asian market most at risk of a sovereign debt crisis with chatter apparently growing in Delhi of a potential need to sound out the IMF. This is despite the fact that India does not have a debt market reliant on foreign capital given the lack of foreign ownership of rupee debt," he said in his Greed & Fear write up.

Elara Capital said: "India's problems are first order. Policymaking would better address the structural bottlenecks within primary agents of economic activity namely land, labour, capital, and business sentiments. In the absence of this, restoration of pre-crisis growth will remain purely aspirational. There is a need to understand the difference between cyclical and structural revival and that a lower rate regime led cyclical revival is passé for India."

Fundamental devaluation as an option to overcome the current crisis is largely ruled out as interplays between various factors in the external and domestic economy cast a shadow on the success out of such a move, Elara said. "Income effect led price-inelasticity on imports together with negative real rates and dieselization of the economy has meant that currency weakening may not yield otherwise standard results. Fact remains that government policies and finances are in such shape that any ill-thought move may probably boomerang with a sovereign downgrade to junk."

(This article was published on August 28, 2013)
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Union Budget 2014-15 Highlights

  • Following are the highlights of the Union Budget 2014-15 presented by Finance Minister Arun Jaitley in Parliament on July 10, 2014
  • Income-tax exemption limit raised by Rs 50,000 to Rs 2.5 lakh and for senior citizens to Rs 3 lakh
  • Exemption limit for investment in financial instruments under 80C raised to Rs 1.5 lakh from Rs 1 lakh.
  • Investment limit in PPF raised to Rs 1.5 lakh from Rs 1 lakh
  • Deduction limit on interest on loan for self-occupied house raised to Rs 2 lakh from Rs 1.5 lakh.
  • Committee to look into all fresh tax demands for indirect transfer of assets in wake of retrospective tax amendments of 2012
  • Fiscal deficit target retained at 4.1% of GDP for current fiscal and 3.6% in FY 16
  • Rs 150 crore allocated for increasing safety of women in large cities
  • LCD, LED TV become cheaper
  • Cigarettes, pan masala, tobacco, aerated drinks become costlier
  • 5 IIMs to be opened in HP, Punjab, Bihar, Odisha and Rajasthan
  • 5 more IITs in Jammu, Chhattisgarh, Goa, Andhra Pradesh and Kerala.
  • 4 more AIIMS like institutions to come up in AP, West Bengal, Vidarbha in Maharashtra and Poorvanchal in UP
  • Govt proposes to launch Digital India’ programme to ensure broad band connectivity at village level
  • National Rural Internet and Technology Mission for services in villages and schools, training in IT skills proposed
  • Rs 100 cr scheme to support about 600 new and existing Community Radio Stations
  • Rs 100 cr for metro projects in Lucknow and Ahmedabad
  • Govt expects Rs 9.77 lakh crore revenue crore from taxes
  • Govt’s plan expenditure pegged at Rs 5.75 lakh crore and non-Plan at Rs 12.19 lakh crore.
  • Rs 2,037 crore set aside for Integrated Ganga Conservation Mission called ‘Namami Gange’
  • Kisan Vikas Patra to be reintroduced, National Savings Certificate with insurance cover to be launched
  • FDI limit to be hiked to 49% pc in defence, insurance
  • Disinvestment target fixed at Rs 58,425 crore
  • Gross borrowings pegged at Rs 6 lakh crore
  • Contours of GST to be finalised this fiscal; Govt to look into DTC proposal.
  • ‘Pandit Madan Mohan Malviya New Teachers Training Programme’ launched with initial sum of Rs 500 crore
  • Govt provides Rs 500 crore for rehabilitation of displaced Kashmiri migrants
  • Set aside Rs 11,200 crore for PSU banks capitalisation
  • Govt in favour of consolidation of PSU banks
  • Govt considering giving greater autonomy to PSU banks while making them accountable
  • Rs 7,060 crore for setting up 100 Smart Cities
  • A project on the river Ganga called ‘Jal Marg Vikas’ for inland waterways between Allahabad and Haldia; Rs 4,200 crore set aside for the purpose.
  • Govt proposes Ultra Modern Super Critical Coal Based Thermal Power Technology
  • Expenditure management commission to be setup; will look into food and fertilizer subsides
  • Impasse in coal sector will be resolved; coal will be provided to power plants already commissioned or to be commissioned by March 2015
  • Long term capial gains tax for mutual funds doubled to 20%; lock-in period increased to 3 years
  • Rs 4,000 cr set aside to increase flow of cheaper credit for affordable housing to the urban poor/EWS/LIG segment.
  • EPFO to launch the ‘Uniform Account Number’ service to facilitate portability of Provident Fund accounts
  • Mandatory wage ceiling of subscription to EPS (Employee Pension Scheme) raised from Rs 6,500 to Rs 15,000
  • Minimum pension increased to Rs 1,000 per month
  • Union Budget 2014: List of products getting cheaper/ costlier

  • Finance Minister Arun Jaitley today spared the common man from price hikes by keeping duties on commonly used day-to-day items unchanged but made it costlier for smokers and tobacco consumers with a steep increase in excise rate in tax proposals in Budget 2014—15.
  • Following is a list of what will be cheaper and costlier:
  • CRT television
  • LED/LCD TVs especially below 19 inch
  • Footwear priced between Rs 500 to Rs 1,000 per pair
  • Soaps
  • E—book readers
  • Desktop, laptops and tablets
  • RO based water purifiers
  • LED Lights, fixtures and lamps
  • Pre forms of precious and semi—precious stones
  • Sports Gloves
  • Branded petrol
  • Matchbox
  • Life micro insurance policies
  • HIV/AIDS drugs and diagnostic kits
  • DDT insecticides
  • Cigarettes
  • Aerated drinks with sugar
  • Pan masala
  • Gutka and chewing tobacco
  • Jarda scented tobacco
  • Radio Taxi
  • Imported electronic products
  • Portable X—ray machines
  • Half cut/broken diamonds.


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