The Indian rupee recorded modest gains against its US peer to close out the trading week, despite the nation posting a global record for new coronavirus cases for the second straight day. This has resulted in multiple nations shutting their borders to Indian travelers. Will this have an impact on the broader economy and the currency?
On Thursday, India recorded nearly 333,000 new COVID-19 infections, raising the seven-day average above 281,000. India also reported 2,263 deaths, adding to the death toll of 187,000. Since March, cases have spiked from around 15,000 to where they are today, bringing total cases to above 16.3 million.
Authorities say that the explosion in cases is weighing on the healthcare system as hospitals are overwhelmed with patients. It is so bad that a growing number of hospitals are running out of oxygen supplies and ICU beds.
T.S. Singh Deo, the health minister of the eastern state of Chhattisgarh, told Reuters:
“It is grim. It is grave … there is an extreme shortage of ICU beds. We’ll need to be very careful in the rural areas. If it spreads there, then it will be out of control.”
After seeing a tremendous improvement, what happened? Experts point to complacency and a so-called “double mutant” variant of COVID-19. Prime Minister Narendra Modi noted that a lockdown would be of last resort. Until the situation improves, multiple countries, including Canada, Great Britain, and the United States banned flights from India.
The situation has forced financial institutions to downgrade India’s economic outlook for 2021. UBS slashed its estimate from 11.5% to 10%, Indian rating agency ICRA reduced its economic projections from 11% to 10.5%, and Nomura Singapore decreased its predictions from 13% to 12.6%.
On the data front, according to the Reserve Bank of India (RBI), foreign exchange reserves totaled $582.41 billion in the week ending April 16, up from $581.21 billion in the previous week. Bank loan growth rose 5.3% year-over-year in the week ending April 9, while deposit growth jumped at an annualized rate of 10.9%.
The USD/INR currency pair fell 0.1% to 75.02, from an opening of 75.09, at 14:47 GMT on Friday. The EUR/INR advanced 0.22% to 90.43, from an opening of 90.23.