The rupee is going to continue to depreciate in 2018-2019 due to the movement of oil prices and domestic as well as global economic developments, according to FICCI’s Economic Outlook Survey that was conducted in July.

“The widening current account deficit and higher inflationary pressures arising out of increasing international crude oil prices are pulling the currency down. Any further rise in oil prices poses significant risks to the fair value of currency,” the Survey said.

It further said “On the domestic front, it was suggested that as India approaches state elections in late 2018 and general elections in early 2019, markets will price in greater degree of political risk premium for the rupee.”

The survey found that even though economists universally believe that the rupee will remain under strain, they were divided on the argument on whether the rupee/US dollar exchange rate could breach the 70-mark. The mark was breached earlier this week.

The FICCI survey said, “Approximately, half of the respondents felt that it was a highly probable scenario. However, they also agreed that the slip would be temporary in nature as historical evidence suggests that the Rupee tends to recover and move to its baseline trend.”

On being asked about the fair value of the currency, majority of the economists believed that the fair value of rupee vis-à-vis the US dollar would be in the range of 65 to 66, the survey said. Commenting on India’s strategy to ensure energy security, the FICCI survey said, “Participating economists universally believed that formation of an Oil Buyers’ Club would be a good move as it would substantially increase the countries’ negotiating power. China and India together account for more than one-fifth of the total world imports of crude oil.”

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