The rupee’s depreciation is a reflection of macro-economic situation and will have implications for India’s credit profile, global rating agency Moody’s has cautioned.
“... It (rupee slide) is a reflection of macro-economic challenges, which do affect the country’s credit profile,”
said Atsi Sheth, analyst, sovereign risk group, Moody’s Investors Service.
The rupee touched a life-time low of 59.93 against the US dollar last week. However, it will not impact India’s sovereign debt repayment capacity, she said.
“Given the very low level of foreign currency debt owed by the Indian government, rupee depreciation does not significantly affect sovereign debt repayment capacity,” said Sheth.
She attributed the rupee’s fall to India’s high current account deficit (CAD) and lower capital flows due to slower domestic growth as well as global factors.
Last week the US dollar strengthened against major currencies, including the rupee, on comments by Federal Reserve chairman Ben Bernanke that the US Fed may start scaling back its monetary stimulus programme later this year.
Moody’s currently has a “stable” outlook on India’s ratings. In January, Moody’s had reaffirmed sovereign credit rating of India at “Baa3”, which indicates investment grade.
The CAD — the difference between inflow and outflow of foreign currency — is estimated to be at 5% for 2012-13.
Moody’s expects the Indian economy to grow by 6% in 2013-14. Growth had slowed to a decade-low of 5% in 2012-13.
FIIs pull out over $5 bn in June
Foreign institutional investors (FIIs) have pulled out Rs. 29,191 crore (over $5 billion) from the Indian debt and equities in less than a month due to weakness in the rupee. During June 3-21, FIIs sold bonds worth Rs. 32,549 crore, translating to a net outflow of Rs. 24,163 crore ($4.2 billion) and have pulled out Rs. 5,028 crore ($848 million), according to SEBI data. (PTI/Mumbai)
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