Monday, September 2, 2013

I am negative about the rupee

The falling [Indian] currency is not the problem; it is the symptom of the problem. It is like fever, which is just a symptom of a disease and not the disease itself. The currency depreciation is the symptom of poor balance budget and excessive consumption, which is reflected in the trade and current account deficit. If there is an increase in the short-term interest rates, where there is real return of rupee deposits, then the rupee will bottom out in the near term. However, over the long term, I am negative about the rupee.