Worried over declining value of rupee, the Finance Ministry today said the Reserve Bank and the government are taking steps to arrest fall of the Indian currency which touched a historic low of 57.30 to a dollar.
While the RBI has asked the oil marketing companies to purchase 50 per cent of their dollar requirement from State Bank of India, the government has been taking supportive measures to encourage flow of foreign exchange into the country, Finance Secretary R S Gujral told reporters in New Delhi.
"Government (is taking) action in terms of supportive measures for ensuring higher inflows of foreign exchange. . . government is conscious of (situation) and is taking appropriate action", he said, adding the exchange rate is market determined.
During the intra-day trade, the rupee fell way past the psychological mark of 57 for the first time to 57.30 against the dollar on strong demand for the American currency from oil importers, increased capital outflows and concerns over slowdown in global economic growth.
Attributing the current decline in the value of rupee of over 20 per cent in the last one year to volatile international situation, Gujral said, the RBI is intervening to check sudden short term movements in the domestic currency.
The RBI has taken a slew of measures to
encourage exporters to bring back forex and giving freedom to banks to pay higher interest rate on NRI deposits.
Besides, the government has relaxed the portfolio investment norms to attract foreign investment into India.
A decline in the foreign investment flow has impacted the current account deficit, which has touched 4 per cent of GDP in 2011-12.
"Unless suitable measures are taken, if CAD increases, it will pose a burden.
Consequently that needs to be tackled and government is taking adequate steps to tackle that," Gujral said.
Concerned over the high CAD, which arises when import of goods and services exceeds its export, the government has taken measures to reduce the import of precious metals and imposed a 4 per cent duty on gold and 2 per cent on cut and polished diamond.
Gujral said gold imports have declined by $6.2 billion in April-May 2012, over the corresponding period last year, while there was a decline of $3.7 billion in the import of cut and polished diamond.
Asked if there would be a favourable impact of fall in the crude oil prices Gujral said, "the fall in crude prices assists us in our CAD. But rupee depreciation counteracts the benefit on the crude oil for our fiscal deficit".
The crude oil prices for the Indian basket has fallen to $94 per barrel. It had scaled to a high of $125 a barrel in mid-March.
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Worried over declining value of rupee, the Finance Ministry today said the Reserve Bank and the government are taking steps to arrest fall of the Indian currency which touched a historic low of 57.30 to a dollar.