Why is India's currency on the slide?

New low against the dollar today.

The Indian rupee crashed to a new low against the US dollar today as foreign investors continued to pull their money out of the country. Following a slump of 3 per cent today, the rupee has now depreciated by 24 per cent this year from 55 per dollar at the end of 2012 to 68 per dollar currently.

According to Timetric wealth analyst Shekhar Tripathi the depreciation is being caused by a number of factors. These include rising oil prices and a high current account deficit. He stated "the price of crude puts tremendous stress on the Indian Rupee as India has to import the bulk of its oil requirements in order to satisfy local demand."

A lack of government reform has also been highlighted as a contributing factor as the Indian government could have introduced far more reforms during the boom years between 2003 and 2008. Instead they failed to sufficiently build infrastructure or liberalize markets for labour, energy and land during this period and now it is far more difficult to source investment for this.

According to Progressive Media analyst Sunil Agarwal "the lack of economic reform and political paralysis was a major cause of the recent depreciation with the Reserve Bank of India sending out mixed signals on monetary policy".

He also pointed to the recent recovery in the US which has encouraged US investors to pull their money out of emerging markets and invest more money onshore.

India’s problems are not limited to the recent depreciation. Despite relatively strong growth over the past decade India remains one of the poorest countries in the world with the bulk of the population still living below the poverty line.

According to the latest Credit Suisse Wealth Book India’s wealth per capita amounted to US$2,560 per person at the end of 2012 which is well below the worldwide average of US$31,500. It also compares poorly to other major emerging markets such as China (US$15,000) and Brazil (US$16,500) and perhaps most alarming it is well below the fast growing Indonesia (US$7,100).

The Indian rupee crashed to a new low against the US dollar today. Photograph: Getty Images

Andrew Amoils is a writer for WealthInsight

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Donald Trump promises quick Brexit trade deal - but the pound still falls

The incoming President was talking to cast out Brexiteer, Michael Gove. 

The incoming President, Donald Trump, told the Brexiteer Michael Gove he would come up with a UK-US trade deal that was "good for both sides".

The man who styled himself "Mr Brexit" praised the vote in an interview for The Times

His belief that Britain is "doing great" is in marked contrast to the warning of current President, Barack Obama, that Brexit would put the country "at the back of the queue" for trade deals.

But while Brexiteers may be chuffed to have a friend in the White House, the markets think somewhat differently.

Over the past few days, reports emerged that the Prime Minister, Theresa May, is to outline plans for a "hard Brexit" with no guaranteed access to the single market in a speech on Tuesday.

The pound slipped to its lowest level against the dollar in three months, below $1.20, before creeping up slightly on Monday.

Nigel Green, founder and chief executive of the financial planners deVere Group, said on Friday: "A hard Brexit can be expected to significantly change the financial landscape. As such, people should start preparing for the shifting environment sooner rather than later."

It's hard to know the exact economic impact of Brexit, because Brexit - officially leaving the EU - hasn't happened yet. Brexiteers like Gove have attacked "experts" who they claim are simply talking down the economy. It is true that because of the slump in sterling, Britain's most international companies in the FTSE 100 are thriving. 

But the more that the government is forced to explain what it is hoping for, the better sense traders have of whether it will involve staying in the single market. And it seems that whatever the President-Elect says, they're not buying it.


 

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.