Indian Rupee Gains As Modi Government Unveils Union Budget

The Indian rupee is strengthening against the US dollar on Tuesday as the nation’s exports improved in January and the number of coronavirus cases keeps coming down. The rupee, which has flatlined to kick off 2021, had joined the broader emerging market currencies amid uncertainty in the financial markets. But with the COVID-19 pandemic subsiding in the developing country and the economy on the rebound, the rupee could bounce back this year.

According to the Ministry of Commerce and Industry, India’s trade deficit fell slightly to $14.75 billion in January, down from $15.3 billion at the same time a year ago.
Preliminary estimates suggest that exports climbed 5.4% year-over-year to $27.24 billion, driven by sales of cereals, oil meals, iron ore, and miscellaneous processing items. Imports advanced at an annualized rate of 2% to $41.99 billion as the country purchased more gold, precious stones, pearls, and iron.
On Monday, the IHS Markit manufacturing purchasing managers’ index (PMI) edged up to 57.7 last month, up from 56.4 in December. The manufacturing sector witnessed higher output, new orders, prices, and business confidence. Employment levels weakened.
In a recent government report, the Indian economy contracted 7.7% in the 2020–2021 financial year, and officials project that the economy will take two years to return to pre-pandemic levels.

The economy would take two years to reach and go past the pre-pandemic level. These projections are in line with the International Monetary Fund estimate of real GDP growth of 11.5% in 2021–22 for India and 6.8% in 2022–23.

In response to the economic downturn, the government presented a $266 billion package this past spring to improve consumer demand and manufacturing. Policymakers put forward a $35.14 billion package soon after, targeting manufacturing, agriculture, and exports that were decimated by the COVID-19 public health crisis.
On Tuesday, Prime Minister Narendra Modi unveiled a $500 billion budget, and a fiscal deficit of about 9.5%. The government also announced several policy changes, including eliminating the income tax for senior citizens, a tax holiday extension for startups, and a reduction in the time period of tax assessments.
Meanwhile, the number of new coronavirus cases has plummeted since hitting a peak of about 100,000 in September. Daily infections have slipped below 10,000, lowering the seven-day average to around 12,000. In total, India has reported close to 11 million cases, with a death toll of 154,000.
The USD/INR currency pair tumbled 0.21% to 72.9704, from an opening of 73.1259, at 14:57 GMT on Tuesday. The EUR/INR declined 0.49% to 87.76, from an opening of 88.20.
If you have any questions, comments, or opinions regarding the Indian Rupee, feel free to post them using the commentary form below.

Original from: www.earnforex.com