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Higher FII inflows to put pressure on Rupee - FIEO President
05
Apr '10
Mr A Sakthivel, President, Federation of Indian Export Organisations (FIEO) while commenting on the dollar inflows stated that the FII's March investments in stocks was at a sixmonths high of $4 billion in equity and $2.2 billion in debt markets and although more inflows were anticipated due to the arbitrage opportunities / risk aversion available it has created rupee volatility adversely impacting lean export margins.

The FIEO Chief stated that the last time around in 2007 when we had a bout of rupee appreciation the dollar inflows were around $ 40 billion which resulted in the volatility of the rupee inspite of the RBI's stepping in with MSS operations etc. He reiterated his demand that FII inflows should stay in India for a period of 2 years.

Mr A Sakthivel elaboratedthat considering that the inflation is around 9.89% analysts believe that appreciation in the rupee is more than25%.Traditionally there has been an effort by the RBI to match current account deficits with inflows so as to maintain some parity in the rupee, however, with the quantum of inflows increasing, containing volatility may be difficult. In such circumstances, the competitiveness of the. exports would be eroded severely resulting in the labour loss and closure of manyunits.

The RBI in its wisdom towards addressing the larger issues of financial inclusion and employment generation may consider pegging the currency at Rs 47.50 to a US $ for exports only.

Federation of Indian Export Organisations

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