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India Today
09-06-2025
- Business
- India Today
RBI's bumper rate cut leaves rupee exposed to fresh depreciation risk
The Reserve Bank of India's surprise 50 basis point rate cut last week may have been a shot in the arm for growth, but it could come at a quoted in a Reuters report warned that the move has left the rupee vulnerable to further depreciation by eroding foreign exchange forward premiums and weakening the currency's carry trade rupee has already lagged behind its Asian peers in 2025, weighed down by tepid capital inflows. Now, with the RBI easing faster than the US Federal Reserve, the narrowing interest rate differential is expected to keep the rupee on the back fallout has been immediate. The 1-month USD/INR forward premium—sensitive to liquidity conditions—slipped to 7.5 paisa, its lowest since November. The 1-year premium, more closely tied to the U.S.-India rate gap, dropped to 1.5250 rupees, the weakest in nearly a forward premiums make the rupee less attractive for carry trades, where investors borrow in low-interest-rate currencies to invest in higher-yielding ones. Exporters, who typically hedge their future receivables, may find less incentive to do so. On the other hand, importers—looking to cover near-term obligations—could ramp up hedging, further pressuring the result? A more volatile rupee, with fewer buffers against global RBI's 50 bps repo rate cut, well above the expected 25 bps, came alongside a reduction in the cash reserve ratio, signalling a strong shift toward growth-supportive policy amid subdued Kotecha, Head of FX and EM Macro Strategy Asia at Barclays, told Reuters that RBI's rate cut has reduced rupee's appeal significantly. 'In a market where carry is back in focus, that hurts.'Dhiraj Nim, FX strategist at ANZ Research, told the news agency that falling premiums are a 'mild added headwind' for the rupee. He warned that if India's growth momentum stalls, there may be room for yet another rate InMust Watch advertisement
Reuters
04-06-2025
- Business
- Reuters
Rupee to gain modestly, lag most Asian peers despite strong GDP growth
BENGALURU, June 4 (Reuters) - The Indian rupee will eke out very modest gains this year, trailing most of its Asian peers as the U.S. dollar retreats, according to a Reuters poll of foreign exchange strategists. A partially convertible currency, the rupee has barely made any advances against the greenback this year, placing it among the worst performers in Asia. It has not received much support from news of unexpectedly strong growth in the last quarter, either. The U.S. dollar has been knocked off its perch over concerns about U.S. President Donald Trump's erratic tariff policy and more recently because of a ballooning fiscal deficit after the House of Representatives passed a sweeping tax cut and spending bill. Most strategists in the May 30–June 4 Reuters poll did not expect the rupee to make any substantial gains from here, despite widespread expectations for a greenback decline over the coming months due to falling demand for dollar-denominated assets. Over the next three months, the rupee was forecast to gain about 0.8%, trading at 85.25 per dollar by end-August, and then trade at 85.10 in six months and 85.25 in a year, the poll of 41 FX strategists showed. As of Wednesday, the rupee was down roughly 0.3% for the year against the greenback, while regional peers such as the Korean won, Thai baht, Malaysian ringgit and Philippine peso all gained over 4%. That tepid outlook comes even as Asia's third-largest economy posted robust 7.4% growth in the January–March quarter, far exceeding forecasts and marking the fastest rise since early 2024. "The rupee is on somewhat stable footing right now and is likely to hold steady, especially in a weak dollar environment," said Dhiraj Nim, FX strategist at ANZ. "Q1 GDP came in much stronger than expected, adding upside risk to India's growth story. But in any global risk-off scenario, capital tends to seek safety. And I don't think India is where global capital can find safety." The Reserve Bank of India (RBI) is expected to cut interest rates by 25 basis points to 5.75% on Friday and by another quarter point to 5.50% later in the year. But the cumulative 100 basis points of cuts expected is one of the shallowest campaigns in over a decade. ANZ's Nim also said the RBI is likely intervening intermittently in the currency market to keep rupee volatility in check. Having already committed to selling billions of dollars through derivatives contracts in the future, the RBI is expected to buy back substantial amounts of U.S. dollars to maintain its foreign exchange reserves, currently around $693 billion. These dollar purchases are expected to put additional pressure on the rupee, which has fallen over 2% since its near seven-month high on May 2, limiting its ability to strengthen further. "We expect the rupee to underperform peers even as the dollar remains under pressure," wrote Mitul Kotecha, head of FX and EM macro strategy Asia at Barclays. "Following the end of Shaktikanta Das' term as RBI governor, we had noted a regime change for the INR, as the currency transitions to a more flexible trading range, while resuming its long-term depreciation trend. We believe the recent bout of INR unlikely to be sustained." (Other stories from the June Reuters foreign exchange poll)
Yahoo
02-06-2025
- Business
- Yahoo
Rural consumption to drive India's GDP growth this fiscal year, economists say
MUMBAI (Reuters) - Rural consumption is poised to remain a bright spot in the Indian economy, supporting growth in the ongoing fiscal year, economists said after fourth-quarter GDP growth beat estimates. India's economic growth rose to a one-year high of 7.4% in the January-to-March quarter, higher than forecast, data showed on Friday. Personal consumption grew 6% during the three months after an 8.1% rise in the previous quarter. For the fiscal year ending March, inflation-adjusted consumption growth of 7.1% outpaced broader economic expansion of 6.5%, reflecting a rural consumption recovery, Citibank said in a note on Friday. "High frequency data indicates rural demand is faring better even as urban demand is patchy," said A. Prasanna, head of research at ICICI Securities Primary Dealership. "Given rural consumption is a bigger part of overall consumption pie compared to urban consumption and was generally hurting from Covid shock in last few years, it is likely consumption growth will stay resilient." Above-average monsoon rains this year and the resultant rise in farm incomes are likely to boost rural demand as will easing inflation, economists said. Tractor and two-wheeler sales, the bellwether of demand in rural India, have been rising in recent quarters while sales of fast-moving consumer goods have been robust. Rural wage growth, adjusted for inflation, is at its highest in four years, data from ICICI Securities Primary Dealership showed, with demand for jobs under a rural jobs scheme has fallen in recent months, as per a recent JP Morgan report. Over the last two fiscal years, consumption growth in India has risen while investment growth has eased, and the trend may continue, Dhiraj Nim, an economist at ANZ, told Trading India on Monday. "For consumption, to be honest, rural demand can be a source of hope... I think consumption growth can beat GDP growth, but not by a large gap." India's central bank sees economic growth at 6.5% this fiscal year. GROWTH RISKS Even as the rural economy hums along, global uncertainties could hold back wider momentum at a time when trade wars and geopolitical tensions threaten global growth and financial flows. "While India is a domestically-oriented economy, it will not be entirely insulated from a global growth slowdown," said Aastha Gudwani, chief India economist at Barclays. "Given the Indian economy's domestic orientation, where private consumption accounts for more than 55% of GDP, domestic demand is indeed the key driver," she said. India's corporate capex is likely to remain tentative amid heightened uncertainty created by U.S. tariffs and the uncertainty on urban consumption outlook, Gaura Sen Gupta, chief economist at IDFC First Bank, said. Good monsoon rains, along with a pickup in government spending and rate cuts by the central bank could offset some of this hit to growth, economists said. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Economic Times
02-06-2025
- Business
- Economic Times
Rural consumption to drive India's GDP growth this fiscal year, economists say
Rural consumption is poised to remain a bright spot in the Indian economy, supporting growth in the ongoing fiscal year, economists said after fourth-quarter GDP growth beat estimates. India's economic growth rose to a one-year high of 7.4% in the January-to-March quarter, higher than forecast, data showed on Friday. Personal consumption grew 6% during the three months after an 8.1% rise in the previous quarter. For the fiscal year ending March, inflation-adjusted consumption growth of 7.1% outpaced broader economic expansion of 6.5%, reflecting a rural consumption recovery, Citibank said in a note on Friday. "High frequency data indicates rural demand is faring better even as urban demand is patchy," said A. Prasanna, head of research at ICICI Securities Primary Dealership. "Given rural consumption is a bigger part of overall consumption pie compared to urban consumption and was generally hurting from Covid shock in last few years, it is likely consumption growth will stay resilient." Above-average monsoon rains this year and the resultant rise in farm incomes are likely to boost rural demand as will easing inflation, economists said. Tractor and two-wheeler sales, the bellwether of demand in rural India, have been rising in recent quarters while sales of fast-moving consumer goods have been robust. Rural wage growth, adjusted for inflation, is at its highest in four years, data from ICICI Securities Primary Dealership showed, with demand for jobs under a rural jobs scheme has fallen in recent months, as per a recent JP Morgan report. Over the last two fiscal years, consumption growth in India has risen while investment growth has eased, and the trend may continue, Dhiraj Nim, an economist at ANZ, told Trading India on Monday. "For consumption, to be honest, rural demand can be a source of hope... I think consumption growth can beat GDP growth, but not by a large gap." India's central bank sees economic growth at 6.5% this fiscal year. Even as the rural economy hums along, global uncertainties could hold back wider momentum at a time when trade wars and geopolitical tensions threaten global growth and financial flows. "While India is a domestically-oriented economy, it will not be entirely insulated from a global growth slowdown," said Aastha Gudwani, chief India economist at Barclays. "Given the Indian economy's domestic orientation, where private consumption accounts for more than 55% of GDP, domestic demand is indeed the key driver," she said. India's corporate capex is likely to remain tentative amid heightened uncertainty created by U.S. tariffs and the uncertainty on urban consumption outlook, Gaura Sen Gupta, chief economist at IDFC First Bank, said. Good monsoon rains, along with a pickup in government spending and rate cuts by the central bank could offset some of this hit to growth, economists said.
Time of India
02-06-2025
- Business
- Time of India
Rural consumption to drive India's GDP growth this fiscal year, economists say
Rural consumption is poised to remain a bright spot in the Indian economy, supporting growth in the ongoing fiscal year, economists said after fourth-quarter GDP growth beat estimates. India's economic growth rose to a one-year high of 7.4% in the January-to-March quarter, higher than forecast, data showed on Friday. Personal consumption grew 6% during the three months after an 8.1% rise in the previous quarter. For the fiscal year ending March, inflation-adjusted consumption growth of 7.1% outpaced broader economic expansion of 6.5%, reflecting a rural consumption recovery, Citibank said in a note on Friday. "High frequency data indicates rural demand is faring better even as urban demand is patchy," said A. Prasanna, head of research at ICICI Securities Primary Dealership. "Given rural consumption is a bigger part of overall consumption pie compared to urban consumption and was generally hurting from Covid shock in last few years, it is likely consumption growth will stay resilient." Live Events Above-average monsoon rains this year and the resultant rise in farm incomes are likely to boost rural demand as will easing inflation, economists said. Tractor and two-wheeler sales, the bellwether of demand in rural India, have been rising in recent quarters while sales of fast-moving consumer goods have been robust. Rural wage growth, adjusted for inflation, is at its highest in four years, data from ICICI Securities Primary Dealership showed, with demand for jobs under a rural jobs scheme has fallen in recent months, as per a recent JP Morgan report. Over the last two fiscal years, consumption growth in India has risen while investment growth has eased, and the trend may continue, Dhiraj Nim, an economist at ANZ, told Trading India on Monday. "For consumption, to be honest, rural demand can be a source of hope... I think consumption growth can beat GDP growth, but not by a large gap." India's central bank sees economic growth at 6.5% this fiscal year. Growth risks Even as the rural economy hums along, global uncertainties could hold back wider momentum at a time when trade wars and geopolitical tensions threaten global growth and financial flows. "While India is a domestically-oriented economy, it will not be entirely insulated from a global growth slowdown," said Aastha Gudwani, chief India economist at Barclays. "Given the Indian economy's domestic orientation, where private consumption accounts for more than 55% of GDP, domestic demand is indeed the key driver," she said. India's corporate capex is likely to remain tentative amid heightened uncertainty created by U.S. tariffs and the uncertainty on urban consumption outlook, Gaura Sen Gupta, chief economist at IDFC First Bank , said. Good monsoon rains, along with a pickup in government spending and rate cuts by the central bank could offset some of this hit to growth, economists said. Economic Times WhatsApp channel )
