New Delhi: Prime Minister Narendra Modi will hold an economic review meeting on Saturday in order to take stock of the falling rupee and the ever-rising fuel prices.
The Indian currency hit a fresh record low of 72.91 against the dollar on Wednesday, only to recover to Rs 72.35. The currency has fallen over 13 percent against the dollar since January. Petrol and diesel prices kept hitting fresh highs over the last week. Petrol price in Delhi climbed to Rs 80.87 per litre, while in Mumbai it inched up to Rs 88.26. A litre of diesel in the national capital was priced at Rs 72.97 and Rs 77.47 in Mumbai.
Continuous fall of the rupee has shaken the stock markets. Foreign institutional investors pulled out Rs 1,454 crore from the Indian stock markets on Tuesday alone, which is their highest daily outflow in over three months. The sharply declining rupee is not only increasing the fund raising cost in foreign countries but also making imports of crucial items like crude oil extremely expensive.
The central government had raised excise duty on petrol by Rs 11.77 a litre and that on diesel by 13.47 a litre in nine instalments between November 2014 and January 2016 to shore up finances as global oil prices fell. It has cut the tax just once in October last year by Rs 2 a litre. Considering the General Elections in 2019, analysts believe, the government needs to come up with measures to keep the growth momentum going.
Meanwhile, the government may infuse fresh liquidity into the system and also issue NRI bonds to raise $30 billion. The RBI, which has not intervened to prevent the rupee fall so far, could also raise policy rates in its October meeting.