What is leading to the fall of Rupee to 80 dollar?
Rupee vs Dollar: When the rupee depreciates, it is more expensive to buy (import) something from outside India. A falling rupee, however, makes India’s products more competitive if one is trying to sell (export) goods and services overseas (especially to the US).
A psychologically significant exchange rate level of 80 against the US dollar was breached by the Indian rupee in early trade on Tuesday. Bloomberg reports that the rupee has fallen to 80.06 per dollar.
A psychologically significant exchange rate level of 80 against the US dollar was breached by the Indian rupee in early trading on Tuesday. There was a drop in the rupee against the dollar yesterday, according to Bloomberg.
Buying (importing) something from outside India becomes more expensive when the rupee depreciates. The flip side is also true. Similarly, a falling rupee makes India’s products more competitive if one is trying to sell (export) them overseas (especially to the US), since depreciation makes them cheaper for foreigners to buy.
The rupee is getting weak against the dollar because there is greater demand for dollars in the market than there is for rupees. The increased demand for dollars over rupees can be attributed to two factors.
One, Indians import more goods and services than they export. The current account deficit (CAD) is what we refer to as the current account deficit (CAD). There is a greater flow of foreign currency out of India than what comes in when a country has it.
Since the start of the year2022, as crude oil and other commodity prices have risen in the wake of the Ukraine war, India’s CAD has widened significantly. Because Indians are demanding more dollars to import goods from outside the country, the rupee has depreciated (lost value against the dollar).
Two, there has been a decline in investments in the Indian economy. There has historically been a CAD in India, as well as in most developing economies. This deficit was made up for in India by foreign investors rushing to invest in the country; this is also known as the Capital Account Surplus. The surplus brought billions of dollars and ensured that the rupee’s demand (relative to the dollar) remained strong.
As of 2022, however, more and more foreign investors are leaving the Indian markets. It is due to the fact that US interest rates are rising much faster than Indian interest rates. In order to contain historically high inflation in the US, the US central bank has aggressively raised interest rates. As a result of this fall in investments, investors looking to invest in Indian stocks have reduced their demand for Indian rupees.
Both of these trends have resulted in a sharp fall in rupee demand (relative to the dollar). As a result, the value of rupee has been decreasing against the dollar.
No, the dollar has been appreciating against all currencies, including the euro and Japanese yen. As a matter of fact, the rupee has appreciated against several currencies, such as the euro.
In order to understand how RBI manages the rupee’s exchange rate, it is important to understand its role in that process. Exchange rates would have fluctuated sharply if they were fully determined by the market – both when the rupee appreciated and when it depreciated.
Rupee exchange rates cannot fluctuate sharply, however, due to restrictions imposed by the RBI. By intervening, it smooths the fall or restricts the rise. Through the sale of dollars in the market, it softens the fall by reducing the gap between rupee demand and dollar demand. This is what causes India’s foreign exchange reserves to decrease. RBI takes away excess dollars from the market in order to hold back the rupee’s appreciation – this is what causes India’s foreign exchange reserves to rise.
Currently, the rupee is expected to fall further and could reach 82 to a dollar by the end of the year.
The wild card entry in UK Prime Minister race
According to the Conservative Home website, Kemi Badenoch emerged as the top Tory candidate, while Rishi Sunak came in fourth.
As Britain’s next prime minister, Kemi Badenoch, a former equalities minister, is the ‘wild card’ in a tightly contested Conservative Party contest.
Badenoch has not only moved from relative obscurity to the top five in what is a crowded field of candidates, but she has also topped a recent poll of party voters.
Among Tory voters surveyed by the Conservative Home website, Badenoch came out on top, while Rishi Sunak placed fourth. Despite Tory MPs backing Sunak, the outcome of the race will depend on the grassroots party members.
After spending her childhood in Nigeria and the US, Badenoch, 42, returned to the UK at the age of 16 where she grew up in Wimbledon, a London suburb. As a British citizen by birth, Badenoch described herself during her first House of Commons speech as a “first-generation immigrant.”
She worked at McDonald’s during her teenage years, then attended the University of Sussex to study computer engineering.
In the years, following her graduation from the college in 2003, Badenoch worked in the IT industry. She has also worked at the Royal Bank of Scotland and the Coutts Bank during her career. In addition, she was responsible for the magazine’s digital operations. She is interested in “engineering and technology, social mobility, and integration”, according to her website.
In 2017, Badenoch, who joined the Conservative Party at the age of 25, was elected to parliament for the first time from Saffron Walden. Since then, she has held junior ministerial positions, including equalities minister. Despite this, she has never held a cabinet position.
After losing the general election in 2010 from the Dulwich and West Norwood seat, she did not run in 2015.
Having failed to win a London Assembly election in 2012, Badenoch entered the Assembly when she was asked to fill the seat left vacant by Tory Victoria Borwick after she became an MP. In the 2016 London Assembly election, Badenoch retained his seat.
As well as being a role of the Transport Committee and Policing and Crime Committee, she has served as the London Tory spokesman for economy.
Badenoch has gained strong support among Tory voters because of her image as a committed Brexiter. Britain’s call to leave the EU had been called “the greatest ever vote of confidence in the United Kingdom’s project”.
According to Badenoch, lowering taxes will boost growth, and spending discipline will be tightened. She had once drawn both criticism and praise for stating that there was no evidence to suggest that UK was “institutionally racist” based on her frankness and strong stance on sensitive issues.
In addition to Liz Truss, Badenoch is seen as someone who can protect Conservative Party values in spite of being anti-woke and right-wing.
Financial Times reports that she supports scrapping the “online harms bill,” which requires social media sites to remove harmful content, and is a vocal critic of the UK’s net zero climate goals.
The two televised debates between the top contenders have allowed Badenoch to shine, coming across as articulate and honest. Although Sunak has held his ground in these debates, Badenoch has made her presence felt ahead of future ballots where Conservative MPs will further narrow the field by removing those with the fewest votes until only two remain.
According to Politico, Badenoch appeals to British voters who believe the country’s politics have become “somewhat stale” in light of the recent election results.
Badenoch was described as a “risk worth taking” in an article from the right-leaning The Spectator.
Despite this, bookmakers predict that Tory MPs will prevent Badenoch from reaching the final two, according to The Spectator.
5G auction race
Jio has put in an EMD (Earnest Money Deposit) of Rs 1,400 crore compared to Bharti Airtel’s EMD of Rs 5,500 crore, Vodafone Idea’s EMD of Rs 2,200 crore, and Adani Group’s EMD of Rs 100 crore. How does the EMD amount affect your business?
According to Department of Telecommunications (DoT) data, Reliance Jio has submitted an earnest money deposit (EMD) of Rs 1,400 crore, compared with Bharti Airtel’s Rs 5,500 crore EMD, Vodafone Idea’s Rs 2,200 crore EMD, and Adani Group’s Rs 100 crore EMD.
Because of the stark difference between the Adani Group’s EMD and the other three telcos, especially Jio, experts believe that the conglomerate might not directly compete with them in the consumer 5G space, at least for now. It is possible, however, that Adani Group, which has said it will enter the auctions, starting July 26, to build private 5G networks, could become a competitor of telecom companies in enterprise solutions.
As it indicates its bidding strategy and spectrum buying capacity, EMD indicates how much spectrum a company wishes to acquire.
According to its EMD, an applicant can target a certain quantum of airwaves in select spectrum bands based on its eligibility points. Analysts estimate that the Adani Group could potentially purchase spectrum worth Rs 700 crore based on its EMD.
Analysts tracking the field believe that Adani Group may bid in the 26 GHz millimetre band, which is a high speed, low latency band ideal for private networks, since it’s not looking to enter the consumer 5G space.
Credit Suisse noted that Adani’s low EMD indicates that its participation in the spectrum auction will be limited to the 26GHz band, which is the “cheapest band for enterprise use cases”.
Jio, on the other hand, has the potential to buy spectrum worth around Rs 1,30,000 crore, as well as bid for the premium 700 MHz band which is targeted at consumer applications.
According to Credit Suisse, Jio should bid at least 100-150MHz in the 3.5GHz band, 500MHz in the 26GHz band, 5-10MHz in the 700MHz band and selectively increase its spectrum holdings in the 800MHz and 1800MHz bands.
Credit Suisse predicts that Airtel will restrict its bidding to 3.5 and 26 GHz bands with an EMD of Rs 5,500 crore.
It is also possible for Airtel to selectively add spectrum in the 900MHz and 1800MHz bands to circles such as Delhi, Mumbai, Kolkata, Gujarat, Tamil Nadu, etc.”
It added that Vodafone Idea would be able to bid only for the minimum amount of spectrum required: 50MHz in the 3.5GHz band and 400MHz in the 26GHz band.
As stated previously, Adani is only participating in the auctions to build private networks for business verticals like airports, power plants, logistics, and ports. Credit Suisse, Morgan Stanley, Nomura, and others report that Adani Group may not compete with the telcos in the consumer 5G space, but it has nowhere categorically stated that it will deploy these private networks only to its own business verticals.
To set up their own private 5G networks, entities can lease spectrum from telecom companies, according to DoT rules released last month. The Adani Group could potentially compete directly with the other three telecom companies by leasing spectrum to other companies, experts believe. In combination with the general view that enterprise solutions will drive revenues for telecom companies, the Adani Group may be looking at a larger share of overall revenue.
India Africa conclave
This two-day summit is attended by 40 high-level ministers from 17 countries, including Cameroon, Burkina Faso, Eswatini, Republic of Congo, Nigeria, and Sierra Leone.
In New Delhi, high-level diplomats from several African nations are participating in a two-day investment meeting which will be inaugurated by Vice President Venkaiah Naidu on Tuesday (July 19). During the summit, Minister of External Affairs Dr S Jaishankar and Minister of Trade Piyush Goyal were scheduled to attend.
Fourteen high-level ministers from 17 countries will attend the two-day summit, including, Burkina Faso, Eswatini, Republic of the Congo, Cameroon, Ethiopia, Gabon, Equatorial Guinea, Ghana, Niger, Malawi, Mauritius, Sudan, Namibia, Nigeria, and Sierra Leone.
With the support of India’s Ministry of External Affairs and Ministry of Commerce & Industry, the CII-EXIM Bank Conclave on India-Africa Growth Partnership was launched in 2005.
The conclave has been held for the 17th time. According to its website, the conclave has developed into one of the biggest gatherings of senior ministers, policy makers and business leaders from Africa and India across sectors.
In addition to infrastructure development and trade finance, education and training, agriculture and food processing, consultancy services, and healthcare, the conclave will focus on other areas where Indian companies have steadily increased their presence in Africa over the years.
According to the African Export-Import Bank (Afriexim Bank) and Exim Bank, trade between the African subcontinent and India has grown from $7.2 billion in 2001 to $59.9 billion in 2017. In 2017, African trade with India accounted for more than 6.4% of total trade.
Trade between India and 48 countries in sub-Saharan Africa decreased from $55.70 billion in 2019-20 to $46.82 billion in 2020-21, according to the Ministry of Commerce and Industry. A negative trade balance exists between India and sub-Saharan Africa, according to figures provided by the Ministry.
In a statement issued on Africa Day, the Ministry of External Affairs said that 38 African nations have benefited from India’s Duty Free Tariff Preference (DFTP) program, which provides duty-free access to 98.2% of the country’s total tariff lines.
So far, Indian concessional loans worth $12.26 billion have been extended to African countries, making them the second-largest recipient, according to the MEA.
In addition to helping India’s private sector enter African nations, Gurjit Singh, author of ‘The Harambee Factor: India-Africa Economic And Development Partnership’, said the conclave also brought African ministers together with their Indian counterparts in informal sessions rather than formal talks.
edited and proofread by nikita sharma
