The rating agency ICRA believes that India's policy rate increase will be more gradual than that of the US.

ICRA anticipates Indias policy rate hike cycle to be shallower than the US Fed . The Indian rupee will reach 77.0-80.0 against per US dollar in the remainder of the first half of FY23 .

New Delhi, India, June 27.Given the uneven domestic economic recovery and a significantly larger output gap than pre-Covid levels, as well as higher inflation tolerance levels, rating agency ICRA anticipates India's policy rate hike cycle to be shallower than the US Fed.In an analysis, the rating agency estimates that while facing global headwinds, the Indian rupee will reach 77.0-80.0 against per US dollar in the remainder of the first half of FY23, despite global headwinds.The Reserve Bank of India intervenes in the economy normally through liquidity control, including the selling of dollars from foreign exchange reserves, with the aim of preventing a steep decline in the value of the rupee.Further, it said that the government's market borrowings have increased significantly during the post-pandemic period, although they were less volatile in FY2022 as predicted, and that they are projected to reach record levels in FY2023.

Given the sharp increases in government bond yields of various tenures to which such small saving instruments are connected, it expects to see them rise for Q2 of FY23.