Govt needs to have sustainable measures to boost exports: Brijen Puri, JPMorgan

In a chat with ET Now, Brijen Puri, Head of Forex Trading, JPMorgan, shares his outlook on currency and gold imports. Excerpts:


ET Now: The rupee is just not responding. Why is that?

Brijen Puri: The market seems to have been looking for more big-bang announcements from the Finance Minister, either on a large chunk of goods being brought under import duties or on a sovereign bond. However, personally, the market is really missing one small point. The disappointment up until now was a lot because while we had a lot of latitudes from the authorities, we did not see a concrete plan in terms of how the government and the RBI plan to achieve stabilisation of the rupee. What has been announced yesterday by the Finance Minister is a good first step towards that breaking down the current account, trying to give a target of 70 billion. We can always quibble about the last couple of billion or 3 or 4 billion whether it is achievable or not, but the important part is that there is a realisation that we need to not only get more debt to finance the current account, but we need to tackle the current account itself. So the gold imports, the assumptions around the gold import, are something which is definitely achievable.

The assumptions on how the oil imports will come off are not entirely clear, but that is very dependent on the external market on how crude behaves in the coming few months. Also in terms of the financing, while tough and daunting, it is not something which is entirely unachievable. That is on the capital account, the ECBs as well as on the FDIs. So all in all, the market was expecting something bigger, but personally, I am happy seeing the plan which is there. Of course, we need a little more detail on how we plan to reduce the current account going forward. So while this is plan on how we get to 70 billion this year, going forward what we need to do on exports and imports on a sustainable basis, that really is the next step which we would be looking for.

ET Now: Do you think the big chink in the armour in FM’s assumption is that he is not betting on any kind of FI outflows? The assumption here is that this year we will not get any inflows but what if we start getting outflows, that suddenly will change the equation by $10 billion?

Brijen Puri: Really that is an assumption. It is very difficult to call on that because it is entirely outside of the Indian authorities’ purview. In the current scenario, it is very dependent on what the FED does in September and more than what it does, what the tone is and what the guidance is going forward. So while that is very difficult to predict, yes on the negative side, one can always assume that there would be outflows, but even assuming a flat FII portfolio, it is reasonable assumption given the current scenario. Of course like you mentioned, that could change should we see a markedly more hawkish Fed than what is currently priced into the market.