Arun Jaitley Promises, Government To Take More Steps To Stabilise Rupee And Narrow CAD

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New Delhi: Union finance minister Arun Jaitley promised many more steps to stabilise the rupee and narrow the current account deficit (CAD). He has assured businesses that the government would be agile in its response to global trends shaping the economy, whic, was underpinned by solid fundamentals supporting annual growth of around 7.5 per cent.

The finance minister said the depreciation in the rupee and the high CAD were transient factors that had indeed affected India, but that these fell short of impacting capital flows of a long-term nature such as foreign direct investment (FDI).

The minister’s assurance of more policy measures comes in the wake of the domestic currency weakening beyond 74 on Friday against the dollar after the Reserve Bank of India decided to keep policy rates steady, belying expectations of a rate hike in some quarters. The rupee recovered some of the lost ground in the inter-bank foreign exchange market on Friday to close trading at 73.77, down 18 paise from its previous close.

Prices of crude oil — India’s biggest import -- have risen more than 10% since August, a factor likely to drive headline inflation. “The way oil prices have been going up, there has been some adverse impact on the CAD. We are trying to take measures to narrow it down. Some more steps are likely,” Jaitley said.

Experts warned the worst may not be over as far as rupee weakness is concerned. The US economy grew at 4.2% in the June quarter, its fastest pace in about four years, and the US Federal Reserve last month raised short term interest rates, its third increase so far this year, and signalled another raise in December — factors that contributes to dollar outflows.

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