"The RBI should intervene right now to halt heavy speculative inflows through the FII (foreign institutional investments) route to reduce the currency volatility, which is currently ranging from 10-15 percent," Infosys Chief Financial Officer V. Balakrishnan told reporters here.
Noting that excessive speculative inflows would kill the export sector, especially the resurgent IT industry, Balakrishnan said about $22 billion came through the FII route during the last six months.
"With a trade deficit of $13 billion, such a wide currency fluctuation is unsustainable for the country as well as the software services sector, which depends largely on export revenues. We hope the central bank (RBI) will step in to ensure the quality of inflows," Balakrishnan said.
Referring to the wide appreciation and depreciation of the rupee vis-à-vis US dollar during the last 18 months from
Rs.46-39-52 and then to 44.50 currently, he said such cross movements in the currency market was impacting the company’s operating margins on quarterly and annual basis.
“The rupee appreciated again during the second quarter (July-Sep) of this fiscal (2010-11) from Rs.46.45 to Rs.44.50, impacting our operating margin (30.2 percent) by 1.3 percent and short-term hedging by 0.8 percent,” recalled Balakrishnan.
Admitting that a volatile currency was one of three major challenges facing the IT industry, including the IT bellwether, Chief Executive S. Gopalkrishnan said the company was learning to manage and live with such fluctuations by trying to minimise its impact on the operating margins as it became a global phenomenon.
“Hovering around 10-15 percent, currency volatility is not only very high, but also very challenging as the rupee appreciated 4.5 percent during the last 12 months,” Gopalakrishnan asserted.
Hoping that the rupee would depreciate to Rs.45 against the US dollar soon, Balakrishnan said the RBI should stop at some point of time speculative inflows to stabilise the currency swings.