Business, Finance & Economics

Rupee plunge hits Indian imports


A bus conductor counts Indian currency notes at the the end of a trip at a bus terminus in Mumbai on September 23, 2011. India's rupee rose against the dollar, amid speculation the central bank had intervened in the foreign exchange market to prop up the ailing currency, traders said. The currency has fallen sharply in recent days to a 28-month-low of 50 Indian Rupees to the US dollar as traders rush to the safe haven US unit due to fears over the outlook for the global economy.The fall in the rupee is fuelling India's inflationary woes, making imported goods such as foreign crude oil, on which the country is reliant, more costly.



In more bad news for India's economic, the rupee dropped to a 30-month low of 50.17 against the US dollar Wednesday, signalling that the government's battle with inflation is far from over.

According to the Hindustan Times, analysts expect the fall to continue as the rupee "moves uncomfortably close to its lowest-ever level of 52.17 to a dollar recorded in March 2009."

Because India must import oil and coal to fuel its economic growth, and the fall in its currency makes those imports more expensive, the rupee's depreciation against the dollar is a major cause of runaway inflation, according to the finance ministry.

Oil companies, which raised petrol prices by Rs1.8 per litre last week, said the hike has been necessitated by rising crude prices and falling value of rupee against the dollar, which have made imports costlier.