USD/INR likely to remain in range of 64-66 for some time - Scotiabank

On Friday, S&P Global Ratings kept its sovereign rating unchanged for India at BBB-, while it kept its outlook stable for the nation. A BBB- rating signifies the lowest investment grade rating for bonds. Earlier in the month, Moody’s Investors Service had upgraded India’s local and foreign issuer ratings by one notch to Baa2 with a stable outlook.

S&P cited India’s low per capita income, the sizable fiscal deficit and high general government debt as factors are being a drag for the nation’s credit profile. The rating firm reiterated its BBB- rating on India with a stable outlook indicating that the rating is not expected to see a change in the near future, noted Scotiabank in a research report.

S&P, in October had stated that India needed to improve its fiscal position for a rating upgrade. The fiscal deficit of India improved to 91.3 percent of the budget estimate for the fiscal year 2017-2018 at the end of September from 96.1 percent at the end of August as revenues picked up momentum. The Indian finance minister had hinted on 16 November at a possible relaxation of the fiscal consolidation roadmap going ahead.

If the Indian government decides to relax the deficit target of 3.2 percent of GDP for the fiscal year ending in March 2018, it will be a drag on the Indian rupee.

“USD/INR is expected to stay in a range of 64-66 at the moment amid hovering concern over India’s rising CPI inflation and future fiscal discipline, with India’s foreign reserves stabilizing at around USD 400bn”, added Scotiabank.

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