The rupee is undervalued as compared to its peers, shows the latest data from the Reserve Bank of India (RBI), even as the local currency keeps hitting new lows.
The Indian rupee depreciated a modest 2.9 per cent in the first nine months of the current fiscal, performing better than other currencies like the Canadian Dollar, South Korean Won and the Brazilian Real, according to the Economic Survey tabled in Parliament on Friday. The value of the Indian Rupee (INR) is market-determined, with no target or specific level or band.
The expectations of a borrowing cut by the government faded among bond-market participants after the general election results because they feel the compulsions of running a coalition may put pressure on the exchequer, according to dealers. The recent trend of moderate depreciation in the rupee's nominal effective exchange rate (NEER) might not persist if there are significant changes to the structural reform agenda.
But weak global demand, costly imports play spoilsport
A strong currency helps in fighting some of the import-led inflation.
'It is time to allow the rupee to move towards its true value, as it is hurting Indian exports, investment and SMEs associated with export sectors that create jobs,' argues Pravakar Sahoo.
If the REER is to be restored to its 2004-05 level, the rupee has to depreciate a lot, says V K
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