Stories
Rupee Slips Near Record Low: Jayesh Mehta Urges Action to Plug Capital Leakages
- •The Indian rupee remains under severe pressure near its all-time low despite the country's robust macroeconomic fundamentals and strong economic growth.
- •Jayesh Mehta, Vice-Chairman and CEO of DSP Finance, highlights that India has attracted nearly $140 billion, yet currency slide persists due to unexplained capital outflows.
- •A staggering ₹53,000 crore flowed out of Indian equities within just 10 days, prompting concerns over what is driving foreign investors to pull money out.
- •Regulators are advised to examine potential capital leakages from derivatives, algorithmic trading profits, and remaining corporate linkages between onshore and offshore currency markets.
- •Mehta suggests exploring source-based taxation for equities, similar to government securities, to improve capital flows and address barriers for global investors.
Key Questions Answered
According to Jayesh Mehta, the rupee remains under pressure primarily due to persistent and sharp equity outflows, alongside capital leakages through derivatives and algorithmic trading profits, despite India attracting nearly $140 billion and maintaining strong macro indicators.
While banks' onshore-offshore operations were restricted in March, corporate linkages continue to allow capital movement, prompting experts to argue that these remaining windows must be evaluated and tightened to properly plug capital leakages.
Jayesh Mehta suggested considering source-based taxation—similar to the framework currently used for government securities where foreign investors pay taxes in their home jurisdictions—to help address barriers for global investors and improve capital flows into equities.
