The rupee gained 0.75% against the dollar on Tuesday after the Reserve Bank of India (RBI) decided to transfer ₹1.76 lakh crore to the government that will improve the fiscal situation.
The rupee closed at a one-week high of 71.48 against the U.S. dollar, up 54 paisa over its previous close.
The RBI on Monday decided to transfer ₹1.76 lakh crore to the Centre — including an interim dividend of ₹28,000 crore paid in February.
“The tax revenue assumptions in the FY20 Budget were fairly optimistic. This would have meant that the government would have to cut expenditure drastically towards the end of the year to meet the 3.3% of GDP fiscal deficit target. “The 0.3% of RBI dividend bounty is likely to give some much needed breather in the fiscal math,” economists at HSBC wrote in a note to its clients.
Lower collection
Lower collection of direct taxes were also a reason for concern for the government in meeting its fiscal deficit target.
A report from Bank of America Merrill Lynch said the ₹1.76 lakh-crore figure is similar to the revenue at risk for the FY20 Budget. “How the government will use this amount is yet unclear,” the report said.
The U.S. currency losing strength against major global rivals also boosted the rupee sentiment, dealers said.
Meanwhile, bond yields, that had dropped 9 basis points on Monday, ended 5 bps higher due to profit booking.
