InvestorQ : What are the macro level factors that impact the value of the rupee?
prachi Patwardhan made post

What are the macro level factors that impact the value of the rupee?

Answer
image
3 years ago
Follow

Trade and fiscal related factors are more long term in nature. Economies that tend to see consistently elevated levels of trade deficit tend to have a weaker currency. India runs a monthly trade deficit of $16 billion or approximately $200 billion per year. Currently, the annual import bill is close to around $500 billion. An important factor that determines the rupee strength is how many months of forex cover the RBI has. For example, the forex chest is at $395 billion, which is sufficient to cover 9 months of imports. This is considered a relatively comfortable situation by global standards. If this ratio falls to around 9 months, then the INR tends to depreciate. On the deficit front, the ability of the current government to keep fiscal deficit at around 3% of GDP is a major positive for the INR.

0 Views