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With the rupee fast losing value against the US dollar, the Finance Minister, Mr Pranab Mukherjee, has blamed volatility in global commodity prices for currency depreciation and said deteriorating balance of payment (BoP) situation in several Asian countries also put stress on currencies.
“In several Asian countries, excepting China, the BoP is under stress which leads to currency depreciation,” Mr Mukherjee told reporters here today.
Mr Mukherjee, who is attending 45th annual meeting of the Asian Development Bank Board of Governors here, said certain fundamentals in the Indian economy have to be corrected against the backdrop of the rating agency Standard and Poor’s downgrading outlook for the country’s sovereign rating.
However, he did not elaborate.
The Finance Minister, who will assume the chairmanship of ADB tomorrow, said the global issues which have a bearing on the Asian economies would be discussed at the meeting.
Although the meeting began on May 2, the Philippines President, Mr Benigno Aquino III, formally inaugurated the plenary marked by an impressive ballets by the local artists.
Crude imports
India’s currency has suffered sharp losses by over 15 per cent in the last few months, leaving a bruising impact on the country’s imports, which mainly comprise crude oil.
The rupee depreciation has resulted in the higher landed cost of crude oil by the state-owned oil marketing companies, which have not been able to pass on the price increase to the consumers.
Subsidy bill
With prospects of subsidy bill shooting the budgeted target of Rs 1.8 lakh crore, global rating agency Standard and Poor’s has downgraded the country’s sovereign rating outlook.
The Reserve Bank too has expressed concern over the worsening current account deficit, which is likely to be 3.5 to 4 per cent of the GDP for 2011-12.
Rating outlook downgrade
Asked about the rating outlook downgrades of the India’s sovereign rating, Mr Mukherjee said fundamentals of the economy have to be corrected. “Fundamentals...we shall have to correct...,” he said without elaborating what action the Government was mulling.
He said the domestic issues cannot be discussed here since Parliament is in session.
The main areas of concern for Mr Mukherjee were Euro Zone and Japan, as they provide big markets to the merchandise from the developing world.
“Unless recovery in Japan and Europe is fast-tracked....it will have its impact. Euro Zone crisis is expected to cast its shadow...,” he said
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