Key Highlights:
- INR becomes Asia’s best to worst-performing currency in April 2021.
- A further slowdown is expected due to pandemic-induced lockdowns.
- India becomes 2nd worst-hit country by COVID-19
INR performed better than other Asian currencies in the first quarter of 2021. India was among one of the best-performing economies in Asia at the beginning of 2021, due to a rare current account surplus, economic recovery, and heavy foreign inflows. But INR has began to fall since the start of the second quarter and is in desperate need of recovery now.
The Indian currency rose 0.1% to 74.9650 per dollar on 15th April 2021, paring a loss of as much as 0.4% to traders.
The region’s best-performing currency in the first quarter of 2021, has slipped to the last in the first few weeks of April. The rupee has already weakened past 75 per dollar and is expected to fall further to 76 by year-end, says Federal Bank Ltd.
Effect of ‘The Second Wave’ on Indian Economy
Recently, India overtook Brazil as the ‘2nd worst pandemic hit nation’ in the world. The country has imposed several restrictions within the country to isolate the spread of the virus. The government is also in discussions of a nationwide lockdown.
The COVID-19 pandemic-induced lockdowns in 2020 pushed the country to its worst economic contraction in nearly 70 decades of the country. The effects of a shutdown in 2021 are expected to be the same.
Also read: In detail analysis of the Second wave of COVID-19 in India
Further Dip Expected
Indian currency is further expected to fall as dollar bonds from the nation’s issuers have underperformed in comparison to other Asian countries. More negative growth can be seen due to the unwinding of short dollar positions against the rupee, which ICICI Bank Ltd. estimates have grown to $50 billion.
The rise in commodity prices may push the current account into a deficit in the fiscal year that started in April. The country’s central bank’s quantitative easing announced earlier is seen adding to the liquidity flow but worsening the rupee’s woes.
Also read: The Coronavirus Effect: Seesaw in the Global Job Markets
