Nifty99000 100%

Sensex99000 100%

Article rating: 4.2
Article rating: 4.8
Article rating: 4.3
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: 4.0
Article rating: 4.0
Article rating: No rating
Article rating: 3.0
RSS

News

Kaushik Basu says Re is over-valued, sees fair value at 70-71

Author: PTI/Tuesday, August 7, 2018/Categories: Currency

Kaushik Basu says Re is over-valued, sees fair value at 70-71

Mumbai - Kaushik Basu, the globally renowned economist and a past chief economic advisor at the Union finance ministry, said today the rupee is over-valued and the fair value of the local currency is 70-71 to a greenback.

The widening current account deficit and higher interest rates have made the rupee the worst among its Asian peers so far this year. Since June, the RBI has hiked interest rates twice by 50 basis points to 6.5%, making the rupee bleed more.

Today the rupee hit a fresh two-week low of 68.88 to the dollar, plunging 28 paise on rising demand for the US currency from importers and corporate. The rupee had many times plumbed the 70 levels in the past two months as foreign investors have been dumping the unit for quite some time now.

The rupee has been at the receiving end following widespread concerns about steadily growing trade deficit and current account deficit which had touched 1.9% of the GDP in the first quarter as well as short-term debt coupled with the rising protectionist tendencies on the global front despite its recent pull back from life lows.

According to the Reserve Bank data, the country has to make provisions for a whopping USD 222 billion of forex loan repayments this fiscal year which is a 52% of the present foreign exchange reserves of a tad over USD 404 billion.

For the week to July 27, the forex reserves declined by USD 950.9 million to USD 404.192 billion, owing to a fall in the foreign currency assets.

In contrast, Dalal Street has been scaling new life-tim highs as investors are optimistic about corporate earnings on the back of bullish first-quarter earnings.

Foreign investors have poured in over Rs 2,300 crore into local equities in July, after pulling out over Rs 61,000 crore (from debt and equities) in April-June period, largely due to expectations of a lower trade deficit following a correction in crude oil prices.

"Our exchange rate has tended to appreciate in the past couple of years as we are inflating faster than the industrialised countries. Barring the correction that has taken place in the past few months, the rupee has been appreciating. The right level for the rupee is 70-71 to the dollar," Basu said speaking at an event organised by the JSW Foundation and the Literature Live, a Tata group initiative.

Basu also raised concerns over the jobs market saying the poor employment growth is a matter of concern. "Jobs data is very poor in our country. A part of it is legitimate as so much of work is very different work from what we get in the West," he said.

The former chief economist of the World Bank also said in the West, the definition of jobs is whether one is working or not, or whether one goes to work at 9'o clock and come back at 5'o clock.

"Though our methods of data collection on jobs is taken from the West, those categories don't fit in here. We are very good at collecting consumption data or price data, but not jobs data," he said.

The former CEA also flagged concerns over the rising intolerance in the name of religion and other sectarian causes, saying though we have rightly paid a heavy price in choosing to be a democracy after the Independence, it'll be foolhardy and really disastrous to abandon the path followed so far and adopt an authoritarian rule.

Basu also said despite many ills, globalisation is an irreversible reality but to sustain it in the long term, corporations which have been benefiting from it should be ready to part with a portion of their higher profit with the affected employees and even the local populations.

"As globalisation and offshoring increase your profit margins considerably, you should think about profit sharing with all your stakeholders," Basu said admitting that he has not thought through the modalities and other  executional details yet.

Print Rate this article:
No rating

Number of views (149)/Comments (0)

rajyashree guha

PTI

Other posts by PTI
Contact author

Leave a comment

Name:
Email:
Comment:
Add comment

Name:
Email:
Subject:
Message:
x

Videos

Ask the Finapolis.

I'm not a robot
 
Dharmendra Satpathy
Col. Sanjeev Govila (retd)
Hum Fauji Investments
 
The Finapolis' expert answers your queries on investments, taxation and personal finance. Want advice? Submit your Question above
Want to Invest
 
 

Categories

Disclaimer

The technical studies / analysis discussed here can be at odds with our fundamental views / analysis. The information and views presented in this report are prepared by Karvy Consultants Limited. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy nor Karvy Consultants nor any person connected with any associate companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every employee of Karvy and its associate companies is required to disclose his/her individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Consultants Ltd. This report is intended for a restricted audience and we are not soliciting any action based on it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures or other derivatives related to such securities.

Subscribe For Free

Get the e-paper free