sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Latest Expert Exchange
« Latest Circulars »
 Directions under section 35A of the Banking Regulation Act, 1949 (AACS) - Sikar Urban Co-operative Bank Ltd; Sikar (Rajasthan)
 External Commercial Borrowings (ECB) Policy – Review of Minimum Average Maturity and Hedging Provisions
 RBI-Some Thoughts on Credit Risk and Bank Capital Regulation
 Partial Credit Enhancement to Bonds Issued by Non-Banking Financial Companies and Housing Finance Companies
 Alteration in the name of "Qatar National Bank SAQ" to "Qatar National Bank (Q.P.S.C.)" in the Second Schedule to the Reserve Bank of India Act, 1934
 RBI allows banks for fire audit of currency chests by approved agencies
 RBI launches Quarterly Order Books, Inventories and Capacity Utilisation Survey: July-September 2018 (Round 43)
  RBI-Fire Audit of Currency Chests - Clarification
 RBI-Auction for Sale (Issue/Re-issue) of Government Stock (GS) Oct 29, 2018
 RBI-Auction of Government of India Dated Securities October 29, 2018
 Payments Bank and Small Finance Banks– access to Call/Notice/Term Money Market

RBI Working Paper Series No. 4: Is Exchange Rate the Dominant Factor Influencing Corporate Profitability in India?
August, 18th 2015

The Reserve Bank of India today placed on its website, a Working Paper* titled “Is Exchange Rate the dominant factor influencing Corporate Profitability in India?” The paper is written jointly by Shaoni Nandi, Debasish Majumder and Anujit Mitra of the Department of Statistics and Information Management, Reserve Bank of India.

Indian corporate sector has witnessed a significant growth over last two decades and has become an integral as well as key strategic part of the economy. In this paper, corporate performance has been analysed to assess the significance of firm specific and macroeconomic factors on corporate profitability under two distinct regimes.

With the rapid development of the corporate sector since 2001, factors influencing profitability have altered. During 2002-2007, corporate profitability was mostly influenced by firm-specific indicators such as firm size, leverage, liquidity etc. However, since 2009, the domestic economy became more integrated with global economy and also more sensitive to external shocks. The importance of macroeconomic factors namely exchange rate, interest rate and the WPI inflation rate to determine corporate profitability has also amplified. Among the macroeconomic indicators, the importance of exchange rate of USD/INR has increased manifold in the recent times.When the rupee appreciates, corporate profitability is likely to get a short-term boost, though the long-term impact would depend on import and export elasticities. In the post crisis period, many large private non-financial corporates in India have also been behaving like financial intermediaries to take advantage of the easy liquidity abroad. This has amplified the impact of exchange rate volatility on their profitability. Thus, when forex market is under stress, it is observed that the exchange rate becomes the only critical factor to determine corporate profitability, dominating all other factors. In other words, in a scenario of persistent large depreciation of domestic currency, the performance of the corporate sector is expected to be impacted negatively, which may in turn affect the banking sector.

{as}

The Reserve Bank of India introduced the RBI Working Papers series in March 2011. These papers present research in progress of the staff members of the Reserve Bank and are disseminated to elicit comments and further debate. The views expressed in these papers are those of authors and not of the Reserve Bank of India. Comments and observations may kindly be forwarded to authors. Citation and use of such papers should take into account its provisional character.

Alpana Killawala
Principal Chief General Manager

Press Release : 2015-2016/421

Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Privacy Policy

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions