Factors affecting the strength of Rupee

Last year and half saw Indian Rupee going through a free  fall from a Rs 45/- to Rs 57/-  a Dollar. While NRI community and exporters made a fortune, the importers and the country as a whole paid a severe price for this steep fall. 


The recent rise of Rupee to a level of 53.50 to a dollar has raised hopes of a recovery of Rupee. Can this rise be sustained ? What will be the future of Rupee in next three years ?


The answer to this question should be searched in a heap of hard facts. The major factors which affect the Rupee/Dollar exchange rate are:


1. Current account Deficit/surplus( country's trade account)


2. Fiscal Deficit ( Govt income - expenses)


3. Remittances by NRI Community


4. Capital account receipts which include Foreign Direct investment( FDI), Foreign Institutional Investment( FII) External Commercial Borrowings (ECB) and other borrowings.


The data available under each headings paint a very gloomy picture of situation that is likely to unfold in months and next two three years if remedial measures are not taken on a war footing.


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