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The rout of the rupee has caused angst and panic in the country. The many measures announced by the Government and the RBI seem to have barely worked. Are there out-of-the-box solutions that can support the currency? In a recent interview with Business Line , Jamal Mecklai of Mecklai Financial suggested tapping into the huge gold reserves with the Tirupati temple.
G. Chokkalingam, Managing Director and Chief Investment Officer, Centrum Wealth Management , agrees with the need to monetise gold reserves in the country but wants the RBI to take the initiative. He says, “We should take a bold decision to sell a large part of gold reserves held by the RBI — at least 400 tonnes out of about 558 tonnes and swap them for US dollars. It will fetch about $20 billion. The RBI doesn’t have to compete with people to keep this most unproductive asset.”
Chokkalingam also lays stress on the Government getting its act together. He says, “Coal imports were up by 52 per cent in the month of June. Coal India is reportedly sitting on 100 coal mines that are pending environmental clearance.
“Overnight, you can clear these coal mine projects and start saving on coal imports, at least in the medium term.
“We also need to announce major incentives for growing oilseeds — proper crop planning will reduce the expense of about $15 billion incurred in import of edible oil and oilseeds. This may take six-nine months but all these announcements can really help perception, and this is what drives markets.”
Others suggest using the rupee fall to boost exports of unconventional items. Vikram Murarka, Chief Currency Strategist at Kshitij Consultants , says that the Government and the RBI need not be ‘squeamish’ about the rupee.
He wants them to ‘be bold’ and take advantage of the large rupee depreciation to make exports attractive. “Why not export the large surplus stocks of foodgrains,” he asks.
This would be a proactive (not reactive) step and would take the market by surprise. It could even lead to the rupee stabilising.
In its report released earlier this month, ICICI Securities suggested increasing export credit refinance to make exporters more competitive in global markets.
Experts also say that the Government hasn’t yet tapped all the options to bring in NRI money. Ajay Marwaha, Head – Trading, Treasury, HDFC Bank , thinks that garnering NRI deposits can ease the pressure on the rupee. But with these investors wary of currency depreciation, he suggests sweetening the deal.
He says, “The Reserve Bank of India can open a new NRI deposit scheme, wherein the exchange risk is borne by the central bank itself or by the Government. The scheme can be opened for a limited time period, say, one-year. Thus, the hedging cost will have to be borne only for one year.
“At the end of one year, the depositor can be given the option to transfer the money to either NRE or FCNR account, where the money will stay for another year. Thus, by bearing the hedging cost for only one year, the Government can mop up close to $30-40 billion which is locked in for two years.”
Are the powers-that-be listening?
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