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28 March 2024

Rupee sinks to Rs15 vs. Dh1 even as Indian PM promises ‘more’ reforms

Published
By Vicky Kapur

In what seems to be becoming a regular feature, the markets thumbed-down Indian Prime Minister Manmohan Singh’s reforms rhetoric, with the rupee continuing its slide despite the premier’s promise for a second wave of reforms.

The rupee breached a psychological but crucial support level intra-day on Monday as it fell to Rs15.01 against the UAE dirham (Rs55.11 vs. $1) at 11.10am UAE time (12.40pm India time).

The markets seem to have rejected Singh’s most recent claims, aware that his minority government does not have the required numbers in India’s parliament to push through unpopular but necessary reforms at least until the 2014 general elections.

The UAE’s Indian expats, who have already remitted record sums of money in 2012 as the rupee rout continues, may use this opportunity to remit more money for their loved ones, as well as for making investments in their home country.

A survey of 16,000 Indian expats across the UAE by Sumansa Exhibitions, the company behind Dubai’s Indian Property Show, revealed that 26.7 per cent of non-resident Indians, or NRIs as they are popularly known, are looking to snap up homes as an additional investment.

This is a six per cent rise compared with last year’s numbers. Of those keen to buy real estate in India, 89 per cent said they were looking to invest in big-ticket properties, worth Rs10 million (Dh666,667) and above.

Investors saw the proverbial light at the end of the tunnel in September when Singh anointed P. Chidambaram as the country’s new finance minister, who immediately announced a handful of much-needed reforms. However, Chidambaram has failed so far to follow up with other major reforms as global investors browbeat the Indian rupee into submission once again.

The Indian rupee famously declined 17.5 per cent in four-and-a-half months, from Rs13.23 versus Dh1 on February 5, 2012, to Rs15.55 on June 23, 2012, much to the delight of Indian expats in the UAE and elsewhere.

The rupee hit a six-month high last month, when it traded at Rs14.09 against the UAE dirham on October 8. However, the currency has since declined 6.17 per cent in five weeks, and analysts believe it could weaken further.

The rupee has been on a downward spiral for quite some time now, briefly appreciating in September and early October after the Indian government announced some key economic reforms, but the continuing global economic uncertainty and India’s widening fiscal deficit has kept up the pressure.

The US dollar rose for a third day, buoyed by jitters over the potential US economic impact of the so-called fiscal cliff.

(Home page image courtesy Shutterstock)