Task force to be set up soon to work out such agreements
With the rupee slide continuing, India may explore currency swap arrangements with its major trading partners.
Indicating this, Commerce and Industry Minister Anand Sharma said that a task force would soon be constituted by the government to look into the possibility of working out such agreements. “The task force will have representatives from the Finance and Commerce Ministries, banking sector, and the exporting community. We are looking at the possibility of currency swap arrangements with key countries. The Commerce Secretary will take it forward, and the report will be submitted to the government within four weeks. This is something which is not new, but yes we are thinking on these lines to ease the pressure and also control the outgo of the hard currency wherever it is possible,” Mr. Sharma said after the meeting of Board of Trade (BoT), which was attended by India Inc, exporters and senior officials.
The task force is likely to be notified by the end of this week.
Mr. Sharma said India already had agreed for such currency swap with Japan for the Delhi-Mumbai Industrial Corridor (DMIC). Currency swap agreements involve exchange of one currency for another currency. A dollar swap arrangement would help India support the rupee. Swap agreements in U.S. dollar is expected to provide confidence to the market and prevent excess volatility in financial and foreign exchange markets. Currency swaps have emerged as an important derivative tool after the global financial crisis of 2008 to hedge the exchange rate risks.
India has signed currency swap agreements with Japan for $15 billion and with Bhutan for $100 million. China has shown active interest in entering into such an agreement with India,.
Stating that depreciation of rupee was not helping the exporter community, Mr. Sharma said most of the exports were dependent on import of raw materials which had now become expensive. The BoT discussed ways to enhance exports. Although shipments grew 11.6 per cent in July, sectors such as gold and jewellery and engineering were still in the negative zone.
Federation of Indian Export Organisations (FIEO) President Rafeeque Ahmed said India could look at currency swap arrangement with China, Japan and European Union, among other nations. “The world economy appears to be getting back on its feet as risks from advanced economies have eased with Europe reporting modest growth in the last quarter. Global trade, after contracting for several months, is expanding once again. We expect that the double-digit growth recorded in July will continue with better results from October onwards as order booking position has improved for many sectors,” Mr. Ahmed said.