Desk : Nilesh Shah, Managing Director, Kotak Mahindra Asset Management Company recently expressed his opinion on the Indian Rupee and its fall. He said the Indian rupee is structurally weakening and there is a possibility that it may touch the 100-per-dollar level, but if the decline happens gradually and in a uniform manner then it should not be a cause for concern.

In an interview with news agency ANI, Shah said that “the rupee is destined to depreciate,” and blamed it on high inflation and India’s decline in productivity. According to Shah, “Despite India being the fastest growing major economy, our inflation is higher than our trade partners and our productivity is lower… So for my economy to remain competitive, the rupee will have to adjust.”

He also said that the rupee, after a steady decline of 7 per cent per annum, is now falling at the rate of about 4 per cent and this decline may go down further. According to Shah, “It may be 2 percent in future, but it will depreciate.”

Shah said if the rupee crosses the 100-per-dollar level, it will not be considered a matter of concern, provided it is not due to poor market conditions but due to economic reforms. He also warned that one should avoid trying to artificially inflate the rupee, as this could worsen the economic situation. “If we wrongly appreciate the rupee… capital will leave the country… the economy will be completely ruined,” Shah warned.

For businesses, and especially small and medium enterprises (SMEs), Shah said gradual depreciation is not a major concern as it keeps Indian businesses more competitive. “If it keeps your competitiveness in order, then it’s absolutely fine. They don’t need to do anything,” Shah said.