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Ranking second globally by the total number of COVID-19 cases, India remains a point of reference after experiencing an aggressive wave 2 of the pandemic during the first half of 2021. Daily cases continue to decline, showing the spread is more contained now, but despite that, economic consequences have been felt, as well as uncertainties in the short term.
The average household income has dropped, the economy faced an unprecedented contraction and yet, the Indian Rupee managed to remain relatively stable. Vaccination is still far from what is seen across developed nations, which keeps uncertainty in check, as a new wave could hurt the country again.
India and the Delta variant
Back in April 2021, India became the first country to report more than 400,000 daily COVID-19 cases. Since then, the pandemic has been on a downward path, and now less than 20,000 new cases are reported every day. According to India Today, Kerala is among the regions accounting for most of the new infections, as well as Maharashtra and Tamil Nadu.
Assumed to have originated inside the country, the Delta variant is a strain of the Coronavirus much more contagious, now spreading in other regions of the globe coping with cold weather and low vaccination rates.
Rupee to remain stable?
Despite all the economic hardships that came along as a result of the healthcare crisis, the Indian Rupee managed to remain relatively stable. USDINR is still trading inside a well-defined range between 72 and 75. Any forex trader should be happy with such conditions, since the stability enables more accurate projections of the future.
Now that the pandemic is no longer the biggest concern, financial markets are shifting their attention to economics. The Indian Finance Minister Nirmala Sitharaman recently mentioned that “the country is looking at close to double-digit growth this year and India will be one of the fastest-growing economies”.
In light of these positive developments, the central bank will not be forced to act by devaluing the Rupee in order to cope with an economic backlash. How the currency evolves can depend on foreign factors as well, especially now when other central banks across the globe are shifting their stance towards easing asset purchases and providing early hints for interest rate increases.
The path of the pandemic to influence the currency?
Even though more than 300 million residents are fully vaccinated, that figure represents only 21.7% of the total Indian population. With that in mind, a resurgence of the virus can pose new threats for the economy and local currency. Figures from other regions of the world are not encouraging, as countries with low vaccination rates need to face a new wave of pandemic.
When it comes to the Indian Rupee, the currency has demonstrated resilience thus far and should continue to do so, as long as the economic prospects are not severely altered. A new pandemic test might await when the weather gets colder, though.
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