MUMBAI, May 17 \u2014 India is scrambling to salvage a sinking rupee as surging oil prices linked to the Middle East conflict threaten to disrupt the world\u2019s fastest-growing major economy.<\/p>\n
The currency has dropped more than five per cent since the crisis erupted in February, extending losses from 2025 and making it Asia\u2019s worst-performing major currency in 2026 so far.<\/p>\n
It hit a record low of over 96 to the dollar on Friday, prompting officials to signal that halting further depreciation is a key macroeconomic priority.<\/p>\n
India\u2019s central bank has already poured billions of dollars to stabilise the currency, curbed speculative trading and offered a special credit line to oil importers to ease dollar demand.<\/p>\n
Prime Minister Narendra Modi has also urged voluntary austerity measures to rein in dollar-guzzling imports, including cutting down on gold buying and foreign travel for a year.<\/p>\n
But the pressure persists.<\/p>\n
\u201cThe whole system has been disturbed,\u201d said Dilip Parmar of stockbroker HDFC Securities, citing heavy foreign investor outflows, weaker growth prospects and elevated crude prices.<\/p>\n
\u201cThat is the basic problem which you\u2019re seeing replicated in the fall of the rupee,\u201d he said, noting that it was ultimately \u201ca function of demand and supply\u201d with dollar demand being higher.<\/p>\n
The rupee\u2019s slide comes as India faces a widening current account deficit driven by costly energy imports.<\/p>\n
The gap is likely to be over two per cent of GDP this fiscal year, more than double last year\u2019s level and potentially the widest since 2012-13, according to Bank of America Securities estimates.<\/p>\n
Widening deficit\u00a0<\/strong><\/p>\n At the same time, foreign investors have dumped more than US$20 billion (RM79.11 billion) in Indian stocks since the start of the Mideast conflict, the fastest pace on record, while dollar inflows have slowed, opening the possibility of a balance-of-payments gap as large as US$67-88 billion (RM265-RM348 billion).<\/p>\n The 2027 fiscal year \u201cwill be our third year of a balance-of-payment deficit, which is certainly unusual,\u201d economist Dhiraj Nim of ANZ Research told AFP.<\/p>\n This strain has weighed on the rupee, prompting the central bank to defend it by burning through foreign exchange reserves \u2013 now at around US$697 billion (RM2.76 trillion), down from over US$720 billion (RM2.84 trillion) before the Middle East war.<\/p>\n While still covering about 11 months of imports, the decline underscores the strain.<\/p>\n A weaker rupee is rippling through the domestic economy.<\/p>\n Manufacturers and food processors, many dependent on imported raw materials priced in dollars, are seeing costs surge.<\/p>\n Smaller firms often lack the ability to hedge currency risks.<\/p>\n In Kerala\u2019s cashew industry, which mostly imports raw nuts from Africa, the impact has been acute.<\/p>\n \u201cImports have become far more expensive for the local market,\u201d said Rajmohan Pillai, who runs a cashew firm, adding buyers can now afford only about 90 per cent of last year\u2019s volumes.<\/p>\n He estimates more than 80 per cent of processing units have shut in recent years, with rupee volatility a contributing factor.<\/p>\n \u2018Last straw\u2019\u00a0<\/strong><\/p>\n India\u2019s currency decline has also hit students looking to study abroad.<\/p>\n Education consultants say studying in the United States now costs more than one million rupees (US$10,450; RM41,335) extra compared with a year ago.<\/p>\n \u201cThis is the last straw,\u201d said Meghna Sen, a 17-year-old aspiring psychology student.<\/p>\n \u201cNow we have to track (the rupee) movement to check how much we need for our grocery budgets.\u201d<\/p>\n The depreciation has punctured India\u2019s ambition to become the world\u2019s third-largest economy.<\/p>\n Modi, who once criticised his predecessors over currency weakness, has seen India\u2019s global economic ranking dented because GDP comparisons are measured in dollars.<\/p>\n The country has slipped behind the United Kingdom to the sixth place according to IMF data, largely due to the rupee\u2019s fall.<\/p>\n Nomura analysts warn more drastic measures may be on the anvil.<\/p>\n These include possible fuel price hikes, tighter controls on overseas remittances and steps to attract dollar deposits from non-resident Indians \u2013 a playbook used in past crises.<\/p>\n Still, economists caution that intervention can only smooth volatility, not reverse underlying pressures.<\/p>\n \u201cFundamental factors\u201d remain to be resolved, Nim said, adding \u201cI would not even rule out an interest rate hike which squarely targets future inflation\u201d.<\/p>\n The Reserve Bank of India knows what its options are, he said.<\/p>\n \u201cAll that remains is to see what it decides to choose.\u201d \u2014 AFP<\/p>\n \u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"MUMBAI, May 17 \u2014 India is scrambling to salvage a sinking rupee as surging oil prices linked to…\n","protected":false},"author":2,"featured_media":489007,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[174],"tags":[79,179,18,213359,19,387,17,169300,12856,12604,25608],"class_list":{"0":"post-489006","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-eire","11":"tag-hdfc-securities","12":"tag-ie","13":"tag-india","14":"tag-ireland","15":"tag-middle-east-conflict","16":"tag-mumbai","17":"tag-narendra-modi","18":"tag-rupee"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@ie\/116589291679456394","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/489006","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=489006"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/489006\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/489007"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=489006"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=489006"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=489006"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}