None of the respondents expected the rupee to strengthen beyond 75 per dollar from where it started 2022, anytime this year.
“We have now moved towards a new normal, which will be above 80,” said Sakshi Gupta, chief economist at HDFC Bank.
“Even in a worst-case scenario where you see a deep recession in the US, the Fed raising rates to 6%-6.5%, commodity prices rising again or geopolitical tensions — I think the rupee then goes above 84-85.”
While global commodity prices and the US dollar retreated in the last quarter of 2022, the rupee failed to fully capitalize on the fall. Concerns over the deteriorating external balance and decline in exports eased.
Upasana said, “While India’s FX buffer should be sufficient to shield the economy against any major external shocks, we expect the RBI to become more prudent in H2FY23 in intervening in the FX market and allow the rupee to align with global trends.” Will allow you to go along.” Bhardwaj, Chief Economist, Kotak Mahindra Bank.
Asked what was the major risk to their rupee forecast in the year ahead, respondents were almost split, with nine predicting it would be higher than they expected and seven saying less.
Fiscal deficit widened to a record 9.3% of GDP in 2020-21, but was expected to come down to 6.4% this fiscal, according to the Indian government. Despite the predicted narrowing, it will still be one of the widest among its major regional peers.
Abhishek Upadhyay, senior economist at ICICI Securities Primary Dealership, said “fiscal deficit is still very high and needs to be brought down” to provide some support to the rupee.
“A higher fiscal deficit will hurt the savings-investment balance, prevent improvement in the current account deficit, and complicate the RBI’s efforts to ease inflationary pressures.”