Attributing the slide in rupee value to various domestic and global factors, Union Finance Minister Pranab Mukherjee on Sunday said the Reserve Bank was taking steps to arrest the currency’s depreciation.
“There are a lot of reasons for this (depreciation). There is demand and supply in the market. In the US, there is surplus investment. It used to be a safe haven,” he told reporters.
“Europe used to be an important destination for exports, but demand there is uncertain,” he said, adding global recovery was “poor and fragile” while oil prices were on rise.
India’s fiscal deficit too is widening and is estimated to have touched 5.9 per cent of GDP in 2011-12.
“Because of the cumulative effect of all these reasons the price of rupee is falling down,” he added.
Mr. Mukherjee said the RBI was taking steps to check the depreciation in the Indian currency from time to time.
RBI recently indicated that it may sell dollars directly to oil companies to ease pressure on the currency. Besides, it has already taken steps to curb speculation in the forex market and increase the inflow of foreign currency.
Since early March, rupee has lost about 13 per cent against the dollar driven by a combination of deteriorating global risk sentiment and weak domestic fundamentals.
The rupee had hit an all-time high of 56.38 on Thursday.
On Friday, the rupee gained 27 paise to close at 55.37 after RBI intervened on currency breaching the 56—level in early trade.