“The rupee’s fall is due to global uncertainty, and any central bank action may not help,” he told reporters here. The Finance Minister said that RBI’s intervention would have been helpful if the fall was due to domestic factors. “We expect there will be a self correction in the market,” he said.
In a statement, Mukherjee also said that the RBI is watching the situation in the forex market and will take action as situation unfolds. The fall of rupee to a record level also prompted RBI to say, for the first time since its slide, that it is weighing action to stem the decline.
Rupee declined 5.5 per cent this month and 15 per cent in the entire year. Though a weak rupee benefits exports, the depreciation has become a matter of concern for India as it depends on imports for close to 80 per cent of its oil and gas requirements. The losing streak of the rupee has made India’s imports more expensive.
The rupee fall has also come at a time when inflation has remained above 9 per cent for most part of the year. Analysts say, a further fall in rupee will spur inflation and increase fuel subsidy bill of the oil importing nation. The rise in oil import bill can widen the current-account deficit from 2.6 per cent of gross domestic product this fiscal year, which in turn could add further pressure on rupee.
