According to analysts at Westpac, INR still remains much weaker over the year as the past few months have indeed been a bit rocky in India, but recent release of the World Bank’s Ease of Doing Business index highlights the longer-term progress India has made on structural reforms.
Key Quotes
“India placed 77th for 2019, marking an improvement of 65 positions in ranking since three years ago.â€Â
“Markets had been encouraged by this trend, though since the end of 2017, concerns have arisen over India’s twin deï¬ cits amid global pressures relating to high oil prices and FOMC tightening. There is now a clear tension in the Government around maintaining economic growth into the April/May election, while also meeting deï¬ cit targets.â€
“Recently a ruction emerged between the Government and the RBI about the amount of proï¬t the RBI distributes. The RBI correspondingly warned against infringing on central bank independence. This points to the next six months being a test of the Government’s resolve.â€
“We think markets will remain wary of India in the lead-up to the election and the Rupee is likely to remain near recent lows. Beyond that point, India’s growth prospects and the general trend towards a stronger institutional framework is likely to attract capital into India.â€
“With the USD weakening from September 2019, the INR is forecast to appreciate by around 10% to end-2020.â€