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The Centre maintained a brave face despite the rupee closing at an all-time low and petrol and diesel prices hitting new highs.
When asked about these issues, Subhash Chandra Garg, Secretary at the Department of Economic Affairs (DEA), had a rather predictable reply.
On the rupee, Garg said that there was small mismatch in demand and supply which plays one way or the other depending on the view taken by the operators. The fuel price hikes, he said, he earnestly believes to be temporary.
“The view on the rupee is that at current levels it is at a fairly stable level and that gives me some confidence that where we are today, there may not be much variation. I maintain the same view — between 68 and 70 is where the rupee will mostly remain,” he said.
“We have seen fluctuations in crude. Crude has gone down to a level of $70 per barrel. Some countries are not able to produce. I hope that current fluctuations remain temporary and it will be back to the level of $70-71 soon,” he said.
The rupee on Wednesday closed at 70.59 a dollar, 49 paise or 0.70 per cent lower than the Tuesday closing, logging its biggest single-day drop since August 13, when it nosedived 110 paise or 1.6 per cent.
The rupee is now considered to be worst performer among various emerging economies’ currencies.
The weakening of the currency is one of the three factors (the other two are crude prices and product prices in the international market) affecting the retail prices of rupee.
The petrol price in Delhi reached ₹78.18 a litre on Wednesday, which is ₹1.87 higher than August 1 prices. Similarly, the diesel price rose to ₹69.75 from ₹67.82, showing a rise of ₹1.93 in a span of 29 days.
Garg’s remarks have come at a time when research agencies, both global and domestic, are estimating that higher fuel prices. The weaker rupee will not only affect the current account deficit (CAD) but the fiscal deficit, too.
Though there is no official word on the CAD, government officials felt it might not go up more than 10-20 basis points. However, the government has always maintained that it will be able to contain the fiscal deficit within the budgeted level of 3.3 per cent of GDP.
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