Column: What has changed since Sept?

September 2012 could be defined as the watershed month in the current fiscal. The government announced a series of reforms to pull back the economy from the brink and, till date, such an endeavour is well and truly on. In between, a raft of macro numbers have been released, and it seems that we may have just seen off the worst.

Let us start with the immediate impact of the measures announced by the government. There has been indeed an improvement in investor sentiment since September. Portfolio inflows during September-December 2012 aggregated close to $14 billion, which is slightly lower than $17 billion that flowed into India during the entire FY12! Such a huge rebound in capital inflows had a significant influence on the rupee value that pulled back from R57/$ to the current R54.5/$.

What is the impact of such rupee appreciation? First, the sobering impact on the oil import bill. Our estimates suggest that every one rupee appreciation in rupee value trims the oil import bill by 2%, all other things remaining unchanged. Interestingly, the rupee has depreciated from an average of R49/$ in FY12 to around R54.5/$ currently, a depreciation by roughly R5.5. Contrast this with the oil import bill that has climbed by 11% in the first eight months of current fiscal. Clearly, the increase in oil import bill has been mostly because of the rupee depreciation in the earlier part of FY13, and

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