NEW DELHI: The weak Indian currency will add further pressure on India’s trade deficit, as the costlier crude oil import bill is likely to go up by $26 billion in the 2018-19 financial year, eventually leading to a hike in retail prices.“It’s not a very conducive environment. At one hand, the oil imports are going up, and a weak rupee and higher crude oil prices are adding to the trouble. Even by a conservative estimate, the oil import bill will be at $114 billion,” said a Finance Ministry official.
This is $26 billion more than the oil import bill for the 2017-18 fiscal, which stood at $87.7 billion (`5.65 lakh crore).At present, India’s dependency on oil imports is over 80 per cent of its needs, and in the last fiscal, it imported 220.43 million tonne (MT) of crude oil. “For FY 2018-19, the imports are pegged at almost 227 MT. The official estimation is that crude oil import bill will be pegged at around $108 billion (`7.02 trillion) at an average crude oil price of $65 per barrel and exchange rate of `65 per dollar. However, in the current scenario, it will exceed it,” the official added.
The rupee on Thursday hit another record low of 70.32 against the US dollar in the opening deal.
India’s trade deficit has already shot up to $18 billion and this will put pressure on the current account deficit, which can be a spoiler for the government. The official added that even if the rupee depreciation will result in higher earnings for domestic oil producers and exporters, this would result in a rise in petrol and diesel prices.
“There might be a hike in the retail selling price of petrol, diesel and cooking gas (LPG), which will be seen around the end of this month. If oil prices continue at these levels and the rupee stands at 70 a dollar, the retail rates could go up by 50-60 paisa a litre,” the official added.Prices of petrol and diesel were on Thursday hiked by 6 paise a litre each, to `77.20 and `68.78 respectively, in Delhi.
Exporters to benefit
Exporters say the depreciating rupee may be beneficial for certain segments in the short-term, but global buyers may start asking for discounts if the unit would stay near the 70-mark. The overall impact of the rupee slide will be good, but vary segment-wise. While it could be positive on shipments from the marine, agro, carpet, handicrafts, leather goods, apparel and textiles sectors, segments like gems and jewellery, electronics and petroleum may gain less.
Double whammy for steel sector
New Delhi: The domestic steel sector will feel the heat of rupee fall, as the import of raw materials may get costlier. The cost of servicing debt could also shoot up, say analysts. A weak rupee supports exports but protects the domestic industry, including steel, from imports as they become costlier, JPC chief economist AS Firoz said.
Indian travellers unfazed
New Delhi: The falling rupee has had no adverse impact on the outbound travel plans of Indians, Thomas Cook India and Cox & Kings said on Thursday. “Indian travellers are very calculative. They factor in currency fluctuations and keep a significant buffer while budgeting their travel,” said Cox & Kings relationships head Karan Anand.