GBP/INR: Rupee Backed by Hopes for India’s Economic Recovery

GBP/INR is moving sideways in early trading on Monday, though it points upwards. The pair is slightly up 0.02%, to 92.104 as of 6:34 AM UTC. On Friday, the pound fell 0.58% on disappointing UK PMI data.

Meanwhile, the rupee has been supported by reports suggesting an improving economy. Two of India’s top bankers — Rajnish Kumar, chairman of the State Bank of India (SBI), and Aditya Puri, managing director HDFC Bank — said that there was no reason to despair about the current economic slowdown, as it was a temporary occurrence.

The executives of India’s largest banks spoke in a fireside chat last Friday at the Business Standard Annual Banking Forum. They said that local companies had started to seek fresh loans, which is an early sign of recovery.

Elsewhere, India’s Finance Commission Chairman N. K. Singh also said that the slowdown was only episodic. Speaking at an event in New Delhi, the official stated:

“I do not regard that the current economic sluggishness is something that the country is going to experience for too long. I remain optimistic that the current slowdown is as much as anecdotal, episodic as much as cyclical and structural.”

Nevertheless, Singh stressed that the country had to carry on with both structural and cyclical reforms.

In the first quarter of the fiscal year 2019, which ended June, India’s gross domestic product (GDP) growth tumbled to a six-year low of 5%. Most rating agencies predict that the growth may further decelerate to below 5% in the second quarter that ended September.

However, last week, the Paris-based Organisation for Economic Cooperation and Development (OECD) gave better predictions. The OECD said that India’s monetary and fiscal policies had started to work.

The organization expects India’s GDP to recover at about 6.5% by next fiscal year. The OECD slightly cut its growth forecast for 2019 to 5.8% but suggested it would increase to 6.2% in 2020 and further to 6.4% in 2021.

In the UK, the sterling is driven by increased hopes that Prime Minister Boris Johnson will “get Brexit done” as he promised in his recently published election manifesto. 

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