Historically the Rupee has depreciated against the USD. But this decade could be different.
Here is why I think that INR will not depreciate against the USD this decade.
Shift to EV.
A third of India’s Forex reserve goes in importing OIL. With EV this need to import OIL will come down. We will still need to import things like lithium for manufacturing the battery.
But with battery there is a possibility of recycling, so even if you recycle and recover 20 percent of lithium, it will make India less dependent on imports.
Another key difference is that the Battery purchase is part of Capex while charging the vehicle is the Opex.
In other words, the Bharatiya Consumer will be less affected by the global price fluctuation in Lithium, which means that the Government will not be forced to subsidize the lithium price like they are sometimes forced to subsidize OIL.
Indian Equity Markets are coming of Age
FII’s have pulled out almost 8 Billion USD between September 2021 and Jan 2022. No surprise given that people have been expecting FED to hike rates.
But the surprising factor is that the FII selling has been more than neutralized by DII buying, in fact, Nifty has gained (very slightly though) between September 2021 and Feb 2022.
This shows that Indian equity markets are finding their feet, which in turn will make them more attractive to FII’s, which in turn will mean more demand for INR ( as FII look to invest in Indian Equities)
Is this a Good thing?
Well, it is a very good thing. A strong currency clearly reflects the power wielded by a country. As Bharat’s Economy and Technological Prowess grows, so will the strength of the currency.
I am publishing this article on 9th March 2022. At this point, there is tremendous downward pressure on INR due to the WAR.
I stand by my prediction that INR will be stronger in 2032 when compared to 2022.