Bonds can help to curb rupee's fall for now: DBS

The way rupee has fallen should not come as a surprise to anybody given the underlying demand for the US dollar, says Arvind Narayanan of DBS Bank.

According to him, the government should set up a committee and talk to large sovereign investors who are willing to invest in India. Further, it also can opt for issuing bonds. "Though the current market condition is not too favourable but even if we manage to get USD 4-5 billion though bonds it would be a good start. So automatically you stop the rupee depreciation process for now and it gives you more breathing space to workout sustainable reforms," he added. Below is the edited transcript of Arvind Narayanan’s interview with CNBC-TV18 Q: After that initial panic low that we saw of 62.03 the rupee has now bounced back just a tad bit. How do you see the rupee pan out through the course of the day now? A: The underlying demand still seems to be there for the US dollar, so I would not be too surprised if dollar-rupee starts going higher again after a while. The down move in the dollar-rupee from 62.03 to 61.60 levels is on the back of news that there is a high level meeting happening at the Prime Minister's Office (PMO) and we could see some more announcements. Market will play a bit cautious, but markets will definitely want to see more big bang reforms, maybe smaller number of measures, but more effective, something which can get inflows into the country quickly and demonstrate dollars coming into the country. We would wait for those announcements and see if there is any strength. Q: What are the other reforms that you would want to give us if you had to give us one-two-three in terms of the most important reforms that the government could announce? What would they look like? A: For me the biggest and possibly the simplest or maybe the easiest thing to do now is talk to the investors who are willing to bring money into country and ask them what they want. If you are talking to sovereign wealth funds or if you are talking to large institutional investors outside the country, try and get a sense of what they would like to hear for the money to come in and stay in the country. It is one thing to announce on our own and then see no impact on the investor because he is actually expecting something else. So to my mind a clear-cut working committee talking to the large sovereign funds, trying to see what kind of measures they would like to see in the market in the short-term would help money coming in immediately. Secondly, of course a bond, however this maybe in terms of bad timing or whatever, if that money has to come in, the country might have to just bite that bullet and take the money in, even if it means USD 4-5 billion coming in, it is still a good start, at least the markets would sense the seriousness of the effort and they say the money coming in. So automatically you stop the rupee depreciation process for now and it gives you more breathing space to workout sustainable reforms.