Will try to be make this a short one...
Some opinion on USD-INR have been discussed before...you may want to go through it once...
INR @ 60-65
Just to kind of put the situation as it is right now....
- gold imports have stabilised after the initial fall, which happened on the announcement of the customs duty on gold imports....now that has been raised to 6%. Gold imports may possibly trend downwards for some time from here on.
For the last 3-4 months the avg trade deficit on monthly basis is around
20 bn USD.
That would make it approximately 240 bn USD on an annual run rate basis.
70 bn USD can be covered by IT/ITES.
Another 70 bn USD can be covered up by private transfers or remittances.
So we are left with 100 bn USD. (Current account deficit - CAD)
Assuming ECBs + NRI deposits will support another 30-35 bn USD...it still leaves 60-70 bn USD to be covered by FII + FDI.
That roughly works out to a required inflow of around 5-6 bn USD per month.
FDI is stagnating and thus will have to be compensated by FIIs.
25-30 bn USD of FII inflows was considered fantastic, but now it seems we will be requiring closer to 50 bn USD just to keep semblance of balance. Or our external debt may shoot up assuming forex reserves are to be maintained at the current levels.
There is a lot of talk about how gold imports are creating serious imbalances in the balance of payments.
Gold imports are at around 50 bn USD. If they are reduced by 30-40%, we will probably save 15-20 bn USD. And correspondingly the pressure on required inflows will also be lower.
But looking at the overall CAD of 100 bn USD, savings from gold import reduction seem to be of help but not great help.Even after adjusting for the savings on gold imports, we would still be requiring 4-5 bn USD of FII + FDI monthly. That is not going to be easy to manage and this too is just to maintain status quo on the external front.
Sounding like a treadmill..is it??!!
(Standard Disclaimer : The probability of my opinions going horribly wrong are closer to 1 than to zero!1)
2 comments:
Good post
So where do you see Re Vs $ in the next 1 year ?
TIA
while fortunately I did get the 60-65 range right...I am also not very sure what happens now.
As things happen, maybe we will be able to take call.
For now we are within the 60-65 range.
I am not at technical analysis so won't be able to comment on that kind of stuff.
Thanks for taking time to read this and commenting.
Hope to keep you interested going ahead as well
Thanks
Rahul
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