A year ago, the rupee seemed to be hurtling towards 70 to the dollar — on August 28, 2013, it hit its lowest ever point of 68.825 against the greenback. Foreign investors pulled out money from the bond markets as the US Federal Reserve contemplated the tapering of its bond-buying programme and the widening fiscal and current account deficits added to the currency’s weakness.
A series of measures initiated by Raghuram Rajan, who took over as governor at the Reserve Bank of India (RBI) on September 4, however, helped arrest the slide of the rupee. Chief among these was the move to remove the dollar purchases of oil marketing companies from the market and to announce that these bills could be settled in rupees if necessary. India also attracted $34 billion through FCNR deposits and Tier I capital with the RBI offering banks a concessional swap rate.
With the BJP winning a clear majority in Parliament, foreign investors have been buying into India’s stock and bond markets keeping the currency stable.