Check Rupee depreciation

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Even after revival of IMF programme, the rupee remains weak and unstable. The rupee currently valuing at around Rs 233 in the open market has also raised concerns in business community as rupee depreciation increases landed cost of imported raw material and parts, and brings into question feasibility of several units.

The markets had factored in the IMF loan facility when the exchange rate strengthened by 10.7 percent to reach Rs 213.9 in inter-bank trade on August 16 from a historic low of nearly Rs240 towards end of July.

In our view, the main reason for current depreciation is the liberty given to exchange companies who resort to Hundi and Hawala and also encourage big investors to buy with their undeclared income and sell dollars by pushing the exchange rate for gains.

Then our market is also overburdened by heavy buying of Afghan traders who buy dollars from Pakistani open market and carry out under-invoicing from here.

The smuggling of currency also cannot be ruled out. All this is really harmful to our economy which is faced with serious issues of trade and current account deficits.

The oil prices are witnessing a downward trend in the international market but if our rupee continued its depreciation trend, the government will not be able to pass on its impact to consumers.

Higher oil prices mean transportation cost will also remain on higher side which also heavily impacts prices of essential commodities.

Already the record inflation has broken the back of common man. Hence we will suggest the government to revisit free floating dollar policy.

There is no country around the world which leaves exchange rate completely at the mercy of market forces.

Instead, government or the central bank intervenes to keep exchange rate from running amok.

Time has come that government takes the requisite steps to bring stability in rupee. This will also help the government check prices of essential commodities.

 

 

 

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