Following the historical decline of the rupee, Reserve Bank of India (RBI) governor D Subbarao met Prime Minister Manmohan Singh on Friday to discuss the issue.
Planning commission Deputy chairman Montek Singh Ahluwalia and chairman of the Prime Minister’s Economic Advisory Council (PMEAC) C Rangarajan were also present in the meeting.
The central bank, on Thursday hinted that it would take necessary action to arrest the decline. Subbaro had also said that the central bank was monitoring the situation and could even bring in some structural changes to improve the current account situation.
RBI hinted on the possibility of selling dollars directly to the oil companies to address the situation. Oil companies buy dollars with a view to manage imports of crude from international markets. The demand for the dollars by oil companies is about $12-13 billion in a month.
PMEAC has also been in favour of direct sale of dollars to oil marketing companies. India’s crude oil import bill in 2011-12 was estimated at $155.6 billion. “The current value of the rupee reflects long term fundamentals of the economy in the country and any further slide may be an instance of undervaluation,” Soumya Kanti Ghosh, director and head - Economics & Research-Ficci told HT. “The situation would improve only with the increase in capital flows.”
The rupee recovered somewhat after the government banks increased sale of dollars and RBI indicated that it could look at selling the American currency directly to oil companies.
The rupee which closed at 55.65 to a dollar on Thursday, improved 27 paise at 55.37 on Friday. The Indian currency has been declining continuously since March and touched a historic low of 56.38 to a dollar on Thursday during the intra-day trade.
With inputs from PTI