After the Rajya Sabha’s ratification in bringing the Goods & Services Act into force, the Reserve Bank of India intervened to raise the Indian Rupee's value appreciation against the US dollar. There are also vast expectations from the global investors. The investors are majorly focused on the highest yielding emerging markets as government’s measures ease them with the backing of economic policies.
"Depending on the global risk sentiment we could see fund flows into India continuing in the coming months," said Brijen Puri, managing director, head of markets, JP Morgan (India). "It would be an opportunity for the RBI to shore up our dollar reserves, which could be used to moderate volatility in future."
The rupee rolled up by 15 paisa to the greenback, which led some banks to involve in dealing dollars in early trades on behalf of the central bank on Thursday. Later it rose up by 0.10 percent and paired gains to close at 66.92 from 66.99 on Wednesday. The rupee is mostly expected to be traded in the range of 66.50-67.50 per dollar which lied in the range 67-68, a few weeks ago. Further, the rising of global liquidity may build excessive pressure on the currency.
After its full-fledged enactment, GST would effect in inflation in the short term, but in the long run, it would aid to increase the total gross domestic product as much as 2%. This, combined with better tax compliance and inflated rates on services would boost the government’s finances. The constant fear of the government’s fiscal being dreadful could also end in the post-GST period.
MS Gopikrishnan, head of FX, rates and credit trading at Standard Chartered Bank said- "Unanimous decision to amend the constitution to pave way for introduction of GST is a big positive and will renew optimism among foreign investors.” "While the rupee market had largely priced in the amendment, higher inflows from overseas investors should help the rupee to appreciate." he added.
"Post Brexit global central banks including BoJ, BoE have become aggressive in injecting liquidity into the financial markets," said Anaindya Banerjee, senior analyst at Kotak Securities. "This has helped emerging markets like India, which stands to gain more inflows in coming days."
Mark Carney, Governor of Bank of England united the European Central Bank and the BOJ in triggering the economy, by trimming rates on bond purchases of $170 billion.
In the months ahead, more than $26 billion outflow from NRI deposits is anticipated. This could aid the Central bank to accumulate reserves.