The rupee fell to an all-time low of Rs 49.28 to a dollar on Wednesday sending macro-economic managers, confronted with a rising outflow of foreign funds and a yawning trade deficit, scurrying for options.
The government said the depreciation of the rupee is mainly due higher outflow of foreign institutional investors (FIIs), increased demand of dollars for crude oil imports and appreciation of the US dollar against major currencies since the worsening of the global financial crisis last month.
But nervous exporters, smarting under severe earnings erosions last year, aren’t opening the bubbly yet. “There is always an impact of a recession in developed markets, and in general the business is less,” said Sudhir Dhingra, managing director, Orientcraft Ltd, a garment exporter.
The rupee started depreciating during March this year. After trading in a range of Rs 39.89-40.02 to a dollar for several weeks, the rupee broke above the value of Rs 40 per dollar in the last week of April and has depreciated continuously thereafter, reflecting large capital outflows by foreign institutional investors, increased demand for dollars by importers and bearish stock market conditions.
It hit an all-time low of Rs 49.50 during intra-day trade on Wednesday before recovering marginally.
A falling rupee has also meant that imports have costlier. In August alone, India imported goods worth $29.9 billion — an increase of 51.2 per cent over last year’s $19.8 billion.