India's central bank has been monitoring the rupee and has taken steps to improve dollar inflows, Reserve Bank of India Governor Duvvuri Subbarao said Thursday.
The Indian currency, which breached the 56-mark against the U.S. dollar yesterday, fell to a new low of 56.40 in today's trade.
The central bank is ready to take necessary steps to curb speculation, the chief said. He views the rupee movement as a function of external situation.
The bank is not ruling out the direct sale of dollars to state-owned oil companies, but nothing has been decided yet, Subbarao noted. However, the RBI is not considering a sovereign bond issue as of now, the central banker said.
The three oil marketing companies of the country announced the biggest ever hike in gasoline/petrol prices yesterday as the rupee hit a new record low. Gasoline prices were hiked by as much as 11 percent or 6.28 rupees per litre excluding value added tax/sales tax, effective today.
The size of the increase took analysts by surprise as many had expected the government to announce a five rupees hike. The government had carefully timed the move that came just a day after the conclusion of the budget session of the Parliament. Some partners of the ruling coalition UPA and opposition parties have already called for a rollback.
Reports said the government may consider a partial rollback. Indian media outlets also reported that a meeting of the Empowered Group of Ministers, scheduled for Friday, to discuss raising diesel and cooking gas prices is now in doubt, given the political backlash over the gasoline price hike.
Subbarao urged the government to adopt structural changes to correct the current account deficit. "Fiscal consolidation is very important and very necessary," the RBI chief said. The government must deliver on its fiscal deficit target, he added.
The central bank governor blamed rising food prices for the high inflation in the country. He pointed out that core inflation has stayed below 5 percent. The closely-watched wholesale price inflation rose to 7.23 percent in April from 6.89 percent in March.
by RTT Staff Writer
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