Europe South Asia Asia Pacific Americas Middle East Africa BBC Homepage World Service Education



Front Page

World

UK

UK Politics

Business

Sci/Tech

Health

Education

Sport

Entertainment

Talking Point

In Depth

On Air

Archive
Feedback
Low Graphics
Help

Sunday, April 18, 1999 Published at 15:24 GMT 16:24 UK


Business: The Economy

Ready to defend the rupee

India's parliament: Could Congress rule the roost again?

India's central bank is poised to intervene on the markets to protect the rupee if the currency begins to lose too much value after the collapse of the New Delhi government.

The prospect of another unstable Indian coalition government could depress the rupee's value and reduce international confidence in the Indian economy.

Since the early 1990s India has been liberalising its former state-controlled economy and is now seen as a potentially lucrative emerging market.

The government was defeated on Saturday in a parliamentary vote of confidence. Prime Minister Atal Behari Vajpayee subsequently tendered his resignation.


[ image: Sonia: Tipped for the top]
Sonia: Tipped for the top
The decline of Mr Vajpayee's Bharatiya Janata Party (BJP) now gives Congress the opportunity to return to govern India as it has done for all but six years of the past half century.

Rocky rupee

The rupee is expected to fall to 42.80-43.00 to the dollar first thing on Monday.

It ended last week at 42.72 to the US dollar.

"As events unfold the RBI (Reserve Bank of India) will keep a close watch on it," an Indian Treasury spokesman said.

"It won't let the rupee slip drastically."

Analysts said the currency would fall sharply only if the political uncertainty began affecting economic policy, particularly if the country's 1999/2000 budget was scrapped.

But that seems unlikely as the major political parties have said they do not want to jeopardise the budget.


[ image: Vajpayee: He is no longer the victor]
Vajpayee: He is no longer the victor
Prominent Congress party politician Sharad Pawar said: "Definitely our approach will be that there should not be any financial crisis in the country."

Don't panic

Even though India's parliament is evenly split, making it extremely difficult for any party to form a stable government, the market is unlikely to panic, one regional expert said.

"I expect the rupee to open 10 paise (0.10 rupee) lower... maybe 15 paise at the most," said the treasury head at a European bank.

"But I do not see any reason for sharper moves...I think we have seen throughout last week that the market seems to be a bit more mature," he added. "A year or two earlier, we might have seen a one-rupee move on this kind of uncertainty."

Since the political uncertainty started some two weeks ago, the lowest level the rupee hit was 42.87 in some deals last week, around 1% weaker than its 31 March close of 42.43 to the dollar.





Advanced options | Search tips




Back to top | BBC News Home | BBC Homepage | ©


The Economy Contents


Relevant Stories

18 Apr 99 | South Asia
Congress pledges to avoid budget crisis

17 Apr 99 | South Asia
Gandhi ponders bid for power

17 Apr 99 | South Asia
Profile: India's defeated prime minister

17 Apr 99 | South Asia
Chronic instability of Indian politics





Internet Links


Indian Government

Congress Party

BJP

Reserve Bank of India


The BBC is not responsible for the content of external internet sites.




In this section

Inquiry into energy provider loyalty

Brown considers IMF job

Chinese imports boost US trade gap

No longer Liffe as we know it

The growing threat of internet fraud

House passes US budget

Online share dealing triples

Rate fears as sales soar

Brown's bulging war-chest

Oil reaches nine-year high

UK unemployment falls again

Trade talks deadlocked

US inflation still subdued

Insolvent firms to get breathing space

Bank considered bigger rate rise

UK pay rising 'too fast'

Utilities face tough regulation

CBI's new chief named

US stocks hit highs after rate rise

US Fed raises rates

UK inflation creeps up

Row over the national shopping basket

Military airspace to be cut

TUC warns against following US

World growth accelerates

Union merger put in doubt

Japan's tentative economic recovery

EU fraud costs millions

CBI choice 'could wreck industrial relations'

WTO hails China deal

US business eyes Chinese market

Red tape task force

Websites and widgets

Guru predicts web surge

Malaysia's economy: The Sinatra Principle

Shell secures Iranian oil deal

Irish boom draws the Welsh

China deal to boost economy

US dream scenario continues

Japan's billion dollar spending spree