Rupee needs to depreciate more: Chetan Ahya, MD, Morgan Stanley

In a chat with ET Now, Chetan Ahya, MD, Morgan Stanley, says public capex and FDI inflows can help economic growth

Q- Do you think the current appreciation of rupee is a function of global factors like weakness in dollar index?

A- Yes completely. I do not think that the rupee on its own deserves this kind of appreciation. It is basically a reflection of the dollar weakness. So, if you get dollar strengthening back again, we will be back on the depreciating path and we think the rupee needs to depreciate a lot more because of the pricing pressures that the corporate sector is facing with PPI nonfood still in deep deflation. So corporate sector needs to get protection from a weaker currency. Rupee should be weaker which would be good for corporate sector.

Q- In your recent report you said what we are seeing now is reminiscent of what happened between 1998 and 2002 What is that you are picking in terms of the cycle turnaround at this juncture?

A- I think the genesis of the report was more to focus on experiencing what is happening right now and comparing that with 1998 to 2002 where India took the right steps in terms of policy but the global macro environment was hitting growth outlook. For example, we had between 1998 and 2002, weak pricing power for the corporate sector, exports were weak, capacity utilisation was low and therefore the private corporate sector was not investing. In the background, we also had the legacy debt issue and the non-performing loans issue for the banking sector. So a lot of these factors are similar.