The rupee has dropped over 12% against the US dollar since the beginning of 2018, earning the distinction of Asia’s worst performing currency this year. The rupee collapsed to a fresh low of 73.77 against the US dollar today, as global oil prices continued to rise, deepening concerns about the current account deficit and capital outflows.
Consistent dollar demand from importers, mainly oil refiners, following higher crude oil prices, kept the rupee under pressure. Besides, state-owned oil marketing companies have been allowed to raise USD 10 billion from overseas market to meet their working capital needs.
The macroeconomic problems resulting from a depreciating rupee are not Prime Minister Narendra Modi’s only concerns. He is even more worried about growing public discontent due to the daily rise in petrol and diesel prices. With just seven months to go for the Lok Sabha elections, the Modi government can’t afford to make itself the target of voter anger.
Meanwhile, Commerce and Industry Minister Suresh Prabhu will chair an inter-ministerial meeting today to discuss the depreciating rupee and widening trade deficit. The meeting will deliberate upon ways to address India’s trade deficit in goods and pressure on the rupee. Representatives from the department of economic affairs, coal ministry, steel ministry, oil ministry and department of pharmaceuticals are expected to attend the meeting.