Representative image The Reserve Bank of India announced measures to ease forex inflows. This explainer helps us understand the measures and objectives behind them. What are forex inflows and why are they needed? One of the major factors of a country’s growth is higher savings. Savings are channelised into investments, which help drive the growth of an economy. If the domestic savings rate is low or the investment rate is higher than the savings rate, foreign exchange savings can be used to bridge the gap. Foreign exchange savings are nothing but net inflows of foreign capital. The Indian economy was liberalised in 1991 and efforts were made to attract forex inflows. There are various categories of forex such as Foreign Direct Investment (FDI), Foreign Portfolio Investment (FPI), NRI deposits, and External Commercial Borrowings (ECB). The government and the Reserve Bank of India welcome equity flows such as FDI and FPI, but are cautious about debt inflows because heavy … [Read more...] about MC Explains | Will steps to liberalise forex inflows help the rupee?
Representative Image In the August Monetary Policy Committee (MPC) meeting, RBI Governor Shaktikanta Das said that the Indian Rupee (INR) has fared “much better than several reserve currencies as well as many of its EME and Asian peers”. The Governor also added that the INR has depreciated “more on account of the appreciation of US dollar rather than weakness in macroeconomic fundamentals of the Indian economy”. Of late, there has been a lot of discussion around the INR. Towards the end of July, the rupee touched 80 against a US dollar , leading to discussions that it is a sign of a weakening Indian economy. But, is this the case? First, exchange rate increasing or decreasing against a foreign currency is not a sign of weakness or strength. In fact depreciation of the currency is often cited as a positive development for the domestic economy. If a currency depreciates against a foreign currency, the exports become cheaper with respect to the other country, and imports … [Read more...] about USD vs INR | India’s macroeconomic fundamentals are strong
Representative image Impostor syndrome seems to be more common than actually thought, though at a collective level. People may often feel that the groups they are affiliated with may be underperforming in comparison to other groups. Although this self-critical approach may work in certain cases, it may also overlook the positives, and decrease the morale of those affiliated with the group. Many in India seem to have a collective/national-level impostor syndrome. While the Indian economy is much better placed than its peers in the emerging markets, and other economies, the government is being criticised on the economic front. The criticism comes when the fundamentals of the Indian economy are robust, despite the exogenous shocks caused by the COVID-19 pandemic, supply chain disruptions, monetary policy tightening by the US Federal Reserve, the Ukraine-Russia conflict, and inflated crude oil prices. India's macroeconomic health remains robust despite external pressures, and ongoing … [Read more...] about Bibek Debroy writes: India’s economy is better placed than its peers, other economies around the world
The International Monetary Fund (IMF) has cut its gross domestic product (GDP) growth forecast for India for the current financial year by 80 basis points to 7.4 percent. A similar downgrade has been made to the growth forecast for FY24, which now stands at 6.1 percent as against 6.9 percent earlier. "For India, the revision reflects mainly less favourable external conditions and more rapid policy tightening," the IMF said on July 26 in an update to its World Economic Outlook report. Russia's invasion of Ukraine in late February disrupted supplies of crucial commodities, pushing up prices globally. Consequently, key central banks in the developed world, such as the US Federal Reserve, have begun tightening their monetary policies in earnest to cut down multi-decade high inflation . This has exerted further pressure on the Indian rupee, which has hurtled to multiple record lows in recent weeks and last week breached the 80-per-dollar mark for the first time . Close … [Read more...] about IMF cuts India’s FY23 growth forecast by 80 bps to 7.4%