Bonds, Currencies & Commodities
Weak FII inflows enough to weaken the rupee

When foreign investors have been net sellers in a month, the rupee has depreciated 89% of the time. The rupee could be under pressure if India does not get strong capital inflows as in the past

Foreign flows into the equity market have always been a determinant of the strength of the rupee in the recent few years. The movement in the rupee-dollar exchange rates has been largely dictated by foreign institutional investors (FIIs) as they pull out or flood the market. Moneylife research has shown that when foreign investors have been net sellers in a month, the rupee has depreciated 89% of the times. On taking weekly statistics, whenever FIIs have been net sellers over the week, the rupee has declined 76% of the time. In the month of July 2013, FIIs have pulled out nearly $3 billion, the rupee at Rs60 a US dollar is hovering near its all time low. If the trend continues with FIIs remaining net sellers, we could see the rupee decline further.

FII flows have been extremely volatile and are one of the main reasons for the sharp movements in rupee. In June 2013, on fear of US Federal Reserve reducing quantitative easing (QE), FIIs pulled out over $7.5 billion. This massive outflow caused the rupee-dollar rates to plunge by over 6%, taking it to an all-time low of Rs61 against the US dollar. A similar trend was seen in April and May 2012 with the fear of the Greek exit from the Eurozone. FIIs pulled out over $690 million over the two months and the rupee depreciated by 8.93% to Rs55.73 from Rs51.16. Over the past three years, net monthly outflows of FIIs were few. However, in the months where the net investments by FIIs were negative, the rupee depreciated by an average of 3.72%.

The reverse is true as well. Between the month July 2012 and September 2012, FIIs pumped in over $8 billion in the Indian market. The rupee jumped by nearly 7% to Rs52.70 from a low of Rs56.31. During the months December 2011 to February 2012, FIIs invested $13 billion, the rupee shot up by 6% to Rs49.07 from Rs52.17. Similar instances were seen in the months of September 2010 to October 2010 and March 2010 to April 2010.

There are even instances when FIIs have invested when the rupee has declined. One such instance was seen in May 2013. While FIIs have made a net investment of $6 billion, the rupee has depreciated by nearly 4% to Rs56.50 from Rs54.29 in May 2013. The reason being, Gold imports in May was around 160 tonnes. The rise in imports and decreasing exports has made the US dollar stronger. While gold imports are expected to decline the volatility in the rupee would be determined by FII flows.

FII inflows and outflows are often exogenously determined factors that the Indian government can have little control over, such as the policies of major central banks. When the rupee falls, foreign investors stand to lose from their Indian holdings, leading to a possible pullout from the market. A volatile currency also means that foreign investors need to pay more to hedge against a rising foreign exchange risk.

A reversal of FII fund flows is needed. As seen in 2007-08, the rupee appreciation happened mainly due to FII inflows into the capital market in India. The government’s effort to encourage investment and instil confidence on long-term basis with FIIs has failed in the past. The government is pledging a slew of domestic policy reforms to shore up domestic and foreign investor sentiment. Would this pull in further inflows? If not, rupee is unlikely to gain strength.


RTI Judgement Series: When Vigilance Committee exists only on paper

Vigilance Committee at the Department of Food Supplies and Consumer Affairs in Delhi, carried out no duties of vigilance and was only there in name. This is the 142nd in a series of important judgements given by former Central Information Commissioner Shailesh Gandhi that can be used or quoted in an RTI application

The Central Information Commission (CIC), while allowing an appeal, directed the Public Information Officer (PIO) and assistant commissioner in the Department of Food Supplies and Consumer Affairs (DFSCA) at New Delhi to provide complete information available about the Vigilance Committee to the appellant.


While giving this judgement on 7 April 2011, Shailesh Gandhi, the then Central Information Commissioner said, “There are no rules available with the Respondent and from his submissions it appears that the Vigilance Committee carries out no duties of vigilance and is only there in name. Perhaps, another Vigilance Commission will have to be instituted to look after the working of the Vigilance Committee.”


New Delhi resident Dinesh Kaushik, on 1 October 2010, sought information about the vigilance committee in the Circle-32 from the PIO of DFSCA. Here is the information he sought under the Right to Information (RTI) Act and the reply provided by the PIO...


1. Provide the copy of rule/order/notification under which vigilance committee of Circle 32 has been constituted.

PIO's reply- Orders for the constitution of the vigilance committee are not available with the circle office, however may be available with HQ


2. State the Name and address of all the members of vigilance committee of circle 32.

PIO's reply- Name has been provided

1. Deshraj Singh

2. Rajesh Kr. Tyagi

3. Sushil

4. Dinesh Kaushik

5. Manoj

6. Shama Praveen

7. Rajeev Sharma

8. Deepak Ratni

9. Mr.Neeraj


3. Provide the Date on which vigilance committee of circle 32 was constituted.

PIO's reply- The Committee was formed in January 1997.


4. Provide the Copy of all the proposal/recommendation letters received from various departments for the formation of vigilance committee at circle 32.

PIO's reply- Information not available.


5. Provide the time period from which a vigilance committee of circle 32 is constituted.

PIO's reply- Period is not specified.


6. Provide the Name and address of all the members of last vigilance committee of circle 32.

PIO's reply- As given in point no. 2 above


Kaushik, not satisfied with the information provided by the PIO, filed his first appeal. In his order, the First Appellate Authority (FAA), while dismissing the appeal said, "According to the submissions presented by the PIO that the reply has been given to the main RTI application."


Citing incomplete and misleading information furnished by the PIO, the appellant, Kaushik then approached the CIC with his second appeal.


During the hearing, Mr Gandhi, the then CIC, noted that the information provided to the appellant showed that there was supposed to be a vigilance committee, that has been unchanged since 1997.


The PIO admitted that the Vigilance Committee does not meet every month as required, but only appears to be active when below poverty line (BPL) cards have to be recommended.


Mr Gandhi said, "There are no rules available with the Respondent and from his submissions it appears that the Vigilance Committee carries out no duties of Vigilance and is only there in name. Perhaps another Vigilance Commission will have to be instituted to look after the working of the Vigilance Committee. The addresses of the Vigilance Committee members have also not been furnished since they are not available."


While allowing the appeal, the Bench directed the PIO to check with Head Quarters if there is any information on the Vigilance Committee and rules for the vigilance committee and send it to the Appellant before 30 April 2011. If nothing is available this will be stated, the CIC order said.


Decision No. CIC/SG/A/2011/900295/11898

Appeal No. CIC/SG/A/2011/900295


Appellant                                           : Dinesh Kaushik

                                                                New Delhi - 110059


Respondent                                     : RS Chauhan

                                                              Public Information Officer & Assistant Commissioner,

                                                              Department of Food Supplies and Consumer Affairs,

                                                              C 22/23,Udyog Sadan,

                                                              Qutub Institutional Area,

                                                              New Delhi




4 years ago

Mr Dinesh Kaushik has filed the RTI but there is another Dinesh Kaushik in the vigilance committee. Are these two gentlemen the same persons ?

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