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The Finance Ministry is hopeful that the Reserve Bank’s latest move to ask oil marketing companies to purchase 50 per cent of their daily dollar requirement from one public sector bank will help curb volatility in the forex market.
New Delhi is also doing its bit to stem the rupee’s free fall against the dollar by taking supportive measures to encourage forex inflow into the country, the Finance Secretary, Mr R.S.Gujral, said at an Assocham conference here. Mr Gujral also made it clear that the exchange rate was still market-determined. An appropriate intervention is made by the RBI only when there are sudden, short-term movements in currency, he pointed out.
The rupee hit a historic low of 57.33 intra-day on Friday. It has depreciated over 11 per cent against the dollar since April this year. The oil marketing companies’ demand for dollars was putting pressure on the rupee, as India meets nearly 80 per cent of its crude oil needs through imports.
Mr Gujral felt the rupee’s free fall could counteract the benefits from the steadily falling global crude oil prices. “The fall in crude oil prices clearly assists us in our current account deficit. But rupee depreciation counteracts the benefit on the crude oil for our fiscal deficit. So, clearly, for our current account deficit it has a positive impact. But vis-à-vis fiscal deficit, it would not help us to that extent”.
Import duties
He said the current account deficit in 2011-12 was close to 4 per cent of GDP, and added that several steps were being taken to tackle it. The Budget move to hike import duty on gold from 2 per cent to 4 per cent seems to be paying rich dividends. India’s April-May gold imports this year are down by $6.2 billion, Mr Gujral said.
“The decline in gold imports is significantly due to the 4 per cent import duty and partly due to the strike by jewellers in April. The Government also curbed the imports of cut and polished diamonds in April-May as it imposed 2 per cent import duty. As a result, imports of cut and polished diamonds remained at $3.7 billion, he said.
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