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Attributing the decline in the rupee to global factors, the Reserve Bank of India (RBI) Governor D Subbarao on Thursday said it would be difficult to estimate when the situation would improve.
“The rupee depreciation over the last six weeks has been because of global factors....It is difficult to say how long that effect will persist because it is factors beyond our control,” he told reporters here.
The rupee has declined by nine per cent in the past three months and had touched an all-time low of 61.21 a dollar earlier this week. It however, recovered to a sub-60 level on Thursday following remarks of US Federal Reserve chief Ben Bernanke that the stimulus programme would stay in place for some time.
On the possibility of a rate cut, Subbarao said he would assess growth, inflation and the external situation while taking a view on interest rates in the upcoming review on July 30.
The CAD (current account deficit) remains high, he said. The CAD hit a record high of 4.8 per cent in the last financial year. In view of declining rupee, fears of inflation and high CAD, RBI left interest rates unchanged during the policy review in June.
Earlier, during an outreach programme in Khurda village, he told the gathering the central bank would accord priority to controlling inflation which still remains “high”
RBI’s efforts to contain inflation over the years have yielded fruit, with the wholesale price index (WPI) inflation declining to 4.7 per cent, the lowest in over three years. However, retail inflation stood at 9.31 per cent in May.
The apex bank would look at supporting growth but would make efforts to keep inflation low.
