Govt helpless on rupee fall: Morgan Stanley

The rupee has depreciated 7.4 percent against the dollar since January and over 30 percent since last August,when after the US downgrade by S&P,dollar became the most sought-after currency,on the back of persistent demand and falling capital inflows due to the risk aversion attitude of global investors.

The report also pointed out that India remains most susceptible to capital flows due to higher current account deficit,which is set to overshoot 4 percent of GDP in the fiscal year ended March,which was only 2.7 percent in the previous fiscal.

“India remains most exposed to global funding risks considering its high current account deficit,” the report said,adding it is a symptom of the persistently bad growth mix pursued by policy-makers since the credit crisis unfolded.

While the current account deficit was around 4 percent of the GDP last fiscal,fiscal deficit stood at 5.7 percent against a budgeted estimate of 4.6 percent during this period.

According to Morgan,while the country’s current account deficit rose to USD 72 billion from USD 49 billion in the preceding 12 months,total capital inflows declined to USD 57 billion from USD 67 billion during this period.

“India is in a bind caused by indecisiveness on policy action and a fragile global environment. India’s exit from its vicious cycle depends on some obvious elusive policy action or a hard-to-forecast recovery in global risk appetite,” the report said.

However,the firm is bullish on stocks because of attractive valuations.