A survey conducted by industry body Confederation of Indian Industry (CII) highlights the importance of economic reforms in arresting the depreciation of rupee against dollar.
Some of the key reforms mentioned by the participants of the survey are relaxing the sectoral cap on foreign direct investment (FDI), controlling fuel and fertiliser subsidies, removing hurdles to infrastructure projects.
Till September, the rupee may trade above 59 against the dollar, a majority of participants in the survey said. However, some respondents expect it to remain in the vicinity of 58-59 to a dollar.
Survey participants want government to improve investment environment and make India an attractive business destination for both domestic and foreign investors to prevent excessive volatility and downward pressure on the rupee.
The survey emphasises the need for the next round of reforms by addressing constraints such as land acquisition and environment which delay investments in industry and infrastructure.
It warns that the rupee may continue to remain volatile and might weaken further against the dollar during the next quarter if downside risks accruing from high CAD and dwindling of FDI flows remain unaddressed.
The majority of the respondents have cited high current account deficit (CAD) and burgeoning gold imports as the major reason for the recent downslide of the rupee.