Rupee set to gain against US dollar in 2013, say experts

The rupee is expected to strengthen and will trade at around 53 against the US dollar in 2013. The appreciation in rupee is likely to ease the inflation in the energy sector, thus bringing relief in the prices of basic necessities such as fuel and electricity.

"We are expecting the rupee value to appreciate and trade around 53 against a US dollar next year," said commodity expert Sudip Bandhyopadhyay, managing director of Destimony Securities.

Economists said that one of the fundamental reasons for the boost in the rupee value is that the current account deficit will be better than the last fiscal.

"Last year, the current account deficit had hit an all time high and was around 4.2% of the GDP while the current account deficit in the current fiscal year of 2012-13 will be around 3.7% of GDP. This will thus ease some pressures on the rupee," said Sunil Sinha, head of economic research and senior economist at rating agency Crisil.

Another reason that will contribute to the appreciation of the currency is the improvement in both external and internal macro environment. The experts referred to the euro zone crisis as the external macro environment, while the internal macro environment included the widening fiscal deficit and the policy paralysis that had slowed the growth of the economy.

"Even though the situation in the external macro environment, particularly in Europe, has not yet settled, we are expecting the situation to be less volatile. This is because the euro zone has been able to bail out Greece, Spain and has been able to arrest the situation to some extent," Sinha said.

He further added that on the domestic front, fiscal deficit and policy paralysis were two major causes for the rupee's decline.

"In recent times, there has been some action on both these fronts. The government has taken some reform measures. Also, it has laid out a map for fiscal consolidation which is expected to improve the situation of the rupee," he added.

Experts have asserted that a major reason for the rupee's decline were petroleum products that were available at subsidized prices. To tackle the situation, the government increased the prices of diesel, cooking gas and also put a cap on the available gas, which according to the economists was required to curb the growing deficit.

It is being that once the rupee appreciates, energy sector will gain the most. "If the rupee value goes up and the international oil prices remain stable, then obviously inflation will come down in the fuel sector. Also, industries such as steel and power, where imported coal is used will see a dip in their prices. So, primarily the energy sector will improve as prices will go down and there will be a cascading effect on other industries. Thus, transportation costs will not go up and electricity prices too will remain stable," said another economist who requested anonymity.