Derailing INR Train
The last week of August had ripped the sleeps of many shareholders, leaving the money value diving down in the Indian sub continent. The Reserve Bank of India and the Indian government are trying their best to put rupee back on track, but all in vain. The value of money had a free fall, melting down against dollar, breaking the spell of the Indian growth story. It is a moment of long pause in the desi version of the growth movie.
The crude oil and gold imports are the two important areas of concern to check the derailing INR train. The nose diving Indian currency can be stabilized only when these two issues are addressed with war footing emergency.
Dr. D. Subbarao the leaving Governer of RBI, in his final public speech, had blamed openly the Indian Government for losing its stance and getting the nation into an economic mess up. It was on Aug 29th.
Indian is the largest importer of gold in the world and Indian sub continent on the whole has a gold reserve of 31,000 ton which is worth around $1.4 trillion. The nation right now is crushed between the plummeting money value and the escalating CAG (Current Account Deficit). The later has to be checked immediately. The Finmin’s reiterated plea to the public not to crave on gold has gone into the air, unheard.
The next is setting eye on the oil imports. The country loses a lot in crude oil imports, in foreign exchange. On September first the petroleum ministry headed by Veerappa Moily had urged the Indian PM to increase the imports from Iran. In the past Indian oil imports were mainly from Saudi Arabia. Second in the list was Iran. But due to Tehran’s friction with Washington, the US imposed heavy sanctions on Iran and urged the nations to cut imports from Iran, a diplomatic attempt to pressurize Tehran to roll back its nuclear programme. Indian UPA by then was craving for the 123 nuclear agreement with the US. So naturally than unfriending the US it decided to put down the Iranian friend request.
Iran had clearly stated its willingness to trade oil in rupee unlike any other OPEC nation, where the trade is done only in dollars. This though will be a huge boost to the Indian currency, for India it was not a diplomatically wise move to take the offer. But now having the national economy literally bulldozed Delhi is likely to rethink this lucrative offer. Trading oil in Iran, if kick starts with rupee, will considerably hold the loss due to foreign exchange.
Giving ways to the US sanctions India considerably cut the crude oil import from Iran in the 2012-13 by 26.5%, a mere 13.1 million tonnes as against the 18.1 million tonnes in the previous year. Mr. Moily in his note to the PM, had said if the imports from Iran are encouraged in the remaining months of the current year to an amount of 11 million tonnes, it would save a good $ 8.5 billion in foreign exchange. However no word officially had come in reaction to it.
In the mean time, today, yielding to the Syrian tensions, the Sensex has shed 700 points leaving the investors gloomy. The news about the US missile attack on Syria had sent shock waves severely hitting on the investors sentiments. The US, of course has denied the news about the attack, with Mr. Obama having said that the bill on this issue will be placed before the senate only by Sep 9th. However, much had happened in the market.
Post 4.30 IST yeaterday, the RBI intervened by releasing some of its dollor reserve into the Indian market easing the tension to some extent, helping the rupee to close with a better value compared to the unhealthy intraday stoop against dollar.