The slide in the Indian rupee against the dollar was much more than anticipated, Chakravarthy Rangarajan, Chairman of Economic Advisory Council to the Prime Minister told CNBC-TV18 in an interview on Wednesday.
Today, the rupee reportedly fell as low as 55.96 against the dollar and is set to test the 56 level. The lack of foreign capital inflow worsened the situation, he noted.
He urged the central bank to use foreign exchange reserves to curb fall in the rupee value and the government to adopt macro economic policy as a tool to encourage capital flows.
Despite higher inflation, he said the government should raise petrol prices urgently to bring down fiscal deficit as well as current account deficit.
There will be a temporary impact on wholesale price inflation when petrol prices are raised, but the impact on fiscal deficit will be much more if prices are not raised, he said.
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