Multi-brand retail FDI to fuel rupee to strengthen to below 50 level: Assocham

The rupee is expected to touch below 50 level against the US dollar in the next three months, bolstered by the recent raft of reforms and rising foreign fund flows into domestic stock market, says a report.

The "courageous" decisions on FDI in multi-brand retail, diesel prices hike as well as increased liquidity in global markets -- spurred by monetary easing policies in the US and Europe -- would boost the rupee, Assocham said in a study.

Currently trading at the 53-level against the US dollar, the rupee has depreciated as much as 25 per cent in the last one year, amid sluggish economic trends.

"The courageous decisions on FDI in multi-brand retail and hiking diesel prices in the face of widespread political opposition were the turning points...," Assocham President Rajkumar N Dhoot said.

It so happened that these decisions coincided with the quantitative easing in the US and Europe resulting in rush of liquidity in the global markets, he added.

The study said with rupee likely to drop below Rs 50 against the US dollar, the immediate gain would be a sharp reduction in the landed price of the crude oil and the raw gold.

These two items are the largest in the country's import basket and big grains on the country's current account deficit. Besides other imports such as pulses, edible oil would also see easing of pressure, it said.

During 2012-13, the current account deficit is projected to be 3.5 per cent of the country's Gross Domestic Product (GDP). In the last fiscal, it was 4.2 per cent of the GDP.

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