By:- Mr. Prashant Pimple, Chief Investment Officer – Fixed Income, Baroda BNP Paribas Mutual Fund
The Indian Rupee recently has been witnessing a depreciating trend due to ongoing geopolitical crisis impacting global energy prices and resultant capital outflows in light of such uncertainty. The Indian Rupee has depreciated roughly 7-8% since beginning of this year raising alarms in terms of domestic current account deficit.
As India largely depends on imported crude for its oil needs along with the recent impact of gold imports has led to rapidly widening of the country’s trade deficit, which is the prime reason for such a drastic depreciation in INR. Over and above capital outflows, narrowing US-India interest rate gap and tariff fears has added to the worry.
Going ahead, we expect INR to remain sensitive to developing geopolitical conditions, its ramifications and central bank policies.