The Q1FY21 has not seen a great start in India with a GDP contraction of 23.9%. The economic crises and job losses in the country continue, amidst the depreciating value of the Indian rupee. The rupee came down by 9 paise to 73.55 against the US dollar in the opening trade on Friday while tracking muted domestic equities. The local unit opened at 73.50 at the interbank forex market, but depreciated in the course of time and reached 73.55 against the US dollar, a 9 paise downfall over its last closing figure of 73.46. The dollar index, which is measured in comparison with six other currencies, fell 0.07 percent to 93.26.
The COVID-19 opportunity
According to the data of Union Health Ministry, India’s cases of COVID-19 have sprinted past 45 lakh, and the death toll has reached 76,271 with a record daily hike of 96,551 infections and 1,209 fatalities on Friday. The total recoveries have crossed 35 lakh. Meanwhile, the Serum Institute of India said on Thursday that it is putting the clinical trials of an experimental COVID-19 vaccine by The Oxford University on hold, for which it was supposed to manufacture a billion doses. This is a major trade decision at stake here.
Impact of India-China border conflict
Forex traders believe that the border tension between India and China must have slowed down the investments. India and China had agreed on a five-point roadmap to manage quick disengagement of troops and avoid any further action to resolve the four-month-long face-off in eastern Ladakh. “We have seen sharp gains in the rupee last week and early today, so the fresh round of border issues meant an immediate sell trigger for most,” a trader with a private bank said.
What does the future hold?
Earlier in the day, the rupee had risen in the Asian peers and gained tracking losses in the dollar, as the dollar was headed to register its fourth straight monthly drop in August. Traders believe that the month-end dollar demand from the traders has weighed on the rupee, too, and the local currency will range between 73-73.80 as the dollar buying intervention by the central bank stays absent.
Recommendations by the Policy Times
- As the economy of the country continues to be in shambles, the media attention is almost none towards the subject. As aware citizens, it is important to understand the finance business more than ever.
- India must resolve the conflict with China as soon as possible, with effective measures to build back its global image.
- The coronavirus pandemic and subsequent lockdowns have broken the economic machinery, and it needs to be put back in action.
- To compensate for the falling rates in comparison to the dollar, trade policies need to be improved and revised.