RBI under pressure to end money crunch
The Reserve Bank of India (RBI) should reverse the measures it has taken since April to tighten liquidity to restore investor confidence, boost growth and stabilise the rupee, a number of leading businessmen and economists have said amid dire predictions that the Indian currency could fall to Rs 65 per dollar in the coming days.business Updated: Aug 19, 2013 22:13 IST
The Reserve Bank of India (RBI) should reverse the measures it has taken since April to tighten liquidity to restore investor confidence, boost growth and stabilise the rupee, a number of leading businessmen and economists have said amid dire predictions that the Indian currency could fall to Rs 65 per dollar in the coming days.The rupee touched an intra-day low of 63.30 on Monday, its lowest level ever against the dollar, before closing at a new low of 63.13, down 148 paise, its worst single-day fall in a decade. "There is more pain likely for the rupee in the near term," said Sugandha Sachdeva, currency analyst, Religare.
Experts said RBI’s liquidity tightening measures, instead of stabilising the rupee, was contributing to its fall by hurting growth and raising the spectre of a return of capital controls.
“RBI should not introduce any more monetary tightening measures. It should also roll back some of the measures (it has taken). Hurting growth will impact confidence,” said Abheek Barua, chief economist, HDFC Bank.
“At this juncture, instilling confidence among investors should be the most important task,” added Naina Lal Kidwai, president, Ficci, and country head, HSBC India.
However, Kaushik Basu, chief economist, The World Bank, felt the negative sentiment about India had been “overplayed” but he, too, accepted that growth would suffered.
“Growth may not have bottomed out. We have further to go (down), but the situation is not as bad as is being captured by the headlines,” he said at a function in Delhi.
Indian industry feels cutting interest rates is the only way to revive growth. “We would like to see a lower interest rate structure to revive investments and boost growth and employment,” Chandrajit Banerjee, director general, CII, told Hindustan Times.
“Measures taken by the government and the RBI will not yield results in the medium term,” added Rupa Rege Nitsure, chief economist, Bank of Baroda.
Meanwhile, Assocham chief and Yes Bank CEO Rana Kapoor and Crisil chief economist DK Joshi felt that the reforms measures announced by the government would start showing results after a time lag.
“What we need to do at present is to improve the sentiments by pushing reforms. Sentiments drive investments and this will help the rupee,” Joshi said.