The Indian Rupee is all time record low at 70.32 per dollar. The rupee fall in worrying all the reaction of the Indian economy. It will increase India’s petro crude bill also to record high resulting in price hike of petrol and diesel. It will in turn enhance the goods transport cost and increase in prices of all the commodities.
It is high time when the Reserve Bank of India must intervene to check further fall of the rupee otherwise the nation will face galloping increase in inflation and spurt in food prices.
The fall in rupee this year has already led to surge in food prices all over India. In the last nine months the India’s inflation is higher than the Reserve Bank target of four per cent.
The International Monetary Fund (IMF) suggested that Reserve Bank of India has more ammunition to defended the Rupee by adopting the reserves adequacy measures. The Reserve Bank can still use another 8-10 per cent of its reserve to defend the rupee.
Generally the 45 rupees per dollar is the optimum point and rupee should float around it. But now rupee has crossed 70 rupee per dollar is alarming situation. We are the nation who is importing 80 per cent of its petroleum requirements against payment in dollar. The rupee fall will increase the oil bill by 1.82 lakh crores.
In the past at one time we purchased dollar from Japan as mutual money rates. It is common practice but nation go for it under extra ordinary situation. It also indicates that the nation is importing more and exporting less.
Our exports since a very long time are decreasing. Due to high capital interest of the RBI export facing difficulties in price structure in the global markets.
In the financial year 2018-19 on the basis of 65 rupees per dollar petro crude barrel price our Import Bill of 7.02 lakh crores which is the calculation on the basis of 70 rupees per dollar, it will go up to 114 billion dollars.
The prices of petrol and diesel will go pushing up the prices and inflation further due to high cost of goods transport charges. In the year 2017-18 India imported 22,043 crores tones of crude costing 5.65 lakh crores of rupees.
Almost constant friction between America and Iran on nuclear deal is also upsetting all over oil market. The US sanction against Iran affects the other nations like India, South Eastern countries and China that import much crude oil from Iran. The on going trade war between the US-China has its fall out effect India also.
The Reserve Bank of India is not only the agency of currency notes and fixing the bank rates. It is Monetary Regulator of the country also. RBI cannot escape its responsibility in the fall of rupees to such an extent. The IMF has suggested that the RBI must use option of using its 8-10 per cent of reserve.