Economic Survey 2023: Interest rate hike by US Fed to trigger further weakness in Rupee versus Dollar

Challenge to rupee depreciation persists with the likelihood of further interest rate hikes by the US Federal Reserve, Economic Survey 2022-23 tabled by Finance Minister Nirmala Sitharaman on Tuesday said.

The Economic Survey also noted that INR could be under further duress if India’s Current Account Deficit (CAD) continues to widen as global commodity prices remain elevated and economic growth momentum stays strong.

Any rate hike by US Fed is likley to strengthen the Dollar against its peers, commodity and currency expert Anuj Gupta said. He sees rupee to trade between 81 and 82 against the green over the next 3 days. 

Gupta, who is Vice President (VP), Commodity and Currency Research at IIFL Securities is of the view that the US Cenral Bank could slow the pace of rate hike and that would not let rupee fall appreciably.

Gupta expects Budget 2023 announcements to be positive for industry and businesses and that would strengthen the INR against th USD. 

Rupee has recovered over 1.08 per cent after falling to an all time low of 83.28, Gupta said. At the time of filin of the story, rupee was trading at 81.76 against the Dollar. 

FM Sitharaman will present here last full budget of the Narendra Modi 2.0 government on Wednesday. 

Economic Survey 2022-23 HIGHLIGHTS

* India's economy to grow 6.5 pc in 2023-24, compared to 7 pc this fiscal and 8.7 pc in 2021-22

* India to remain the fastest growing major economy in the world

* GDP in nominal terms to be 11 pc in next fiscal

* Growth driven by private consumption, higher capex, strengthening corporate balance sheet, credit growth to small businesses and return of migrant workers to cities

* India third largest economy in PPP (purchasing power parity) terms, fifth largest in terms of exchange rate

* Economy has nearly "recouped" what was lost, "renewed" what had paused, and "renerengised" what had slowed during the pandemic and since the conflict in Europe

* Real GDP growth to be in the range of 6-6.8 pc next fiscal depending on global economic, political developments

* India's recovery from the pandemic was relatively quick, growth next fiscal to be supported by solid domestic demand, pick up in capital investment

* RBI projection of 6.8 pc inflation this fiscal outside the upper target limit, not high enough to deter private consumption, also not too low to weaken inducement to invest

* Borrowing cost may remain 'higher for longer', entrenched inflation may prolong tightening cycle

* Challenge to rupee depreciation persists with the likelihood of further interest rate hikes by the US Fed

* CAD may continue to widen as global commodity prices remain elevated, economic growth momentum stays strong

* If CAD widens further, rupee may come under depreciation pressure

* Overall external situation to remain manageable

* India has sufficient forex reserves to finance CAD and intervene in forex market to manage rupee volatility

(Disclaimer: The views/suggestions/advises expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)