Government keeping eye on volatile rupee, says Finance ministry official
India’s current account deficit hit a record high of $23.5 billion in May on account of higher commodity prices.
NEW DELHI: Amid concerns over the tumbling rupee, a finance ministry official on Monday said the government is monitoring volatility in the Indian currency. The rupee hit an all-time low recently, breaching the 79-mark against the US dollar. On the widening current account deficit (CAD), the official, requesting anonymity, said it is due to high oil prices.
India’s current account deficit hit a record high of $23.5 billion in May on account of higher commodity prices. Notably, in the month of June trade deficit further expanded to new high at $25.63 billion.
“When oil prices are high, CAD also goes up. For the past many years, India has been bridging the CAD gaps. This year there are challenges and we are addressing them,” the official said.
India imports 85% of oil for its energy needs and the supply constraints amid the Russia-Ukraine war have further made oil dearer.
According to the official, macroeconomic fundamentals and the foreign exchange reserves (forex) are now better compared with the past. Meanwhile, with regard to the fiscal deficit, the official said the government is on a fiscal consolidation path and it will achieve the target of 6.4% of the gross domestic product (GDP) this year.
Recently, the Centre imposed a cess of Rs 23,250 per tonne on crude exports. Besides this, it also levied `6 per litre cess on the export of petrol and ATF and Rs 13 per litre cess on the export of diesel with effect from July 1. According to the official, new levies were imposed on these products as oil producers were making windfall gains by selling crude to international buyers at a time when India is importing oil at a high cost. He declined to comment on the impact of new levies on the overall revenue of the country.
Government on fiscal consolidation path
With regard to the fiscal deficit, the official said the government is on a fiscal consolidation path and it will achieve the target of 6.4% of the gross domestic product (GDP) this year. Recently govt imposed cess on petrol, diesel and ATF to put a curb on the import bill