Ananth Narayan, professor at S. P. Jain Institute of Management and Research (SPJIMR) on Thursday said that too much appreciation of rupee is not good for the industry.
“In terms of actual flows coming into the system, they look extremely robust. We are seeing a lot of dollars flowing into the country right now,” Narayan said.
“This fiscal year, we might see our current account surplus of about $20 billion. In addition, the FPI flows still look robust. FPI equity flows have turned positive and have crossed $10 billion for this fiscal year. So all put together, we are looking at a considerable amount of permanent flows coming into the country, that naturally will put downward pressure on dollar/rupee,” he added.
“Where dollar/rupee eventually settles entirely depends upon the RBI. In terms of foreign currency, RBI does not have a policy framework. The only thing it tells us is it intervenes to manage some unstated measure of volatility, it does not target a level, that is what it has told us, they don’t have a policy in place, which means they can justify anything,” Narayan said.
“It is true that we have a current account surplus. But when the economy recovers again, when the consumption comes back, chances are we will go into a current account deficit again and we will again have negative overall permanent flows going through,” he further mentioned.
“Our domestic industry needs help. Rupee has historically been overvalued and we continue to be a net importer of goods and services. Rupee strengthening at this point of time will be bad news for our domestic industry, for our domestic jobs. It will be good news for imports, we don’t want that,” he said.