Rupee depreciates on higher oil prices, capital outflows

Finance


“We believe its troubles are far from over, as several external and internal factors will continue to expose it to considerable weakness in 2018 and beyond,” Prakash Sakpal, Asia economist at ING, wrote in an April note.

The rupee coming under pressure signals potential troubles that await Asia’s third-largest economy, which saw growth slowed in the past year as it grappled with a surprise demonetization, the introduction of a Goods and Services Tax and mounting bad debt in the banking sector.

Those problems have taken a back seat, but the recent rise in oil prices now threatens to widen the country’s deficits at a time when government spending has increased.

India is a net importer of oil and every $10 per barrel increase in price could worsen its current account and fiscal balances by 0.4 percent and 0.1 percent of GDP, respectively, Nomura analysts estimated. That could shave around 15 basis points off the country’s growth, the analysts wrote in a note.



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