New Delhi: As its current account position becomes comfortable and inflationary pressures eases, India is apparently looking at rupee devaluation to boost exports and support domestic economic activity.
The government on Thursday sent out mixed messages on whether it wanted a weaker rupee, with commerce minister Nirmala Sitharaman first hinting at devaluation and then denying it.
Finance secretary Ashok Lavasa too denied that there was any plan to devalue rupee. “The story regarding devaluation is completely baseless,” Mr Lavasa told FC.
If the government goes for currency devaluation, it would be the first since July 1991 when India devalued its currency by nearly 20 per cent in two steps.
Any rupee devaluation by India is likely to trigger similar moves by other countries, which compete with India in the export market, say analysts. India’s exports have been in the negative zone during last 20 months barring July, impacting investment and job creation in key sectors like textiles.
Consequently, the pace of job creation in 2015 was the slowest since 2009.
Thanks to reduction in oil import bills, the country has seen dramatic improvement in its current account position.
The current account deficit shrunk to just 1.1 per cent of GDP in 2015-16 from 1.8 per cent in the preceding year.
Now there is a projection that current account could swing to surplus in the April-June quarter for the first time in nine years.
