Indian rupee nears all-time lows even as government scrambles to prop it up

India’s
Finance Minister Arun Jaitley reacts as he addresses a press
conference in New Delhi, India, Thursday, Aug. 4,
2016.
AP Photo/Altaf
Qadri

India’s
currency neared all-time lows Monday even after the
government rolled out various measures aimed at propping up the
worst-performing Asian currency of 2018.

The Indian rupee fell as much as 1% to 72.6 per US dollar, even
after Finance Minister Arun Jaitley announced a plan to lower the
country’s current account deficit, saying the falling rupee must
be dealt with “immediately.” The currency has shed more than 13%
in value this year, dragged down in part by a
broader emerging-market sell-off. 

The new measures include reducing “non-necessary” imports, as
well as relaxing rules for overseas borrowing and for banks to
raise rupee-denominated overseas bonds. The government has not
specified which imports would be subject to new restrictions, but
local media reports suggest officials are considering regulation
of luxury items like gold and cars. 

Shilan Shah, senior India economist at Capital Economics, said
the depreciation should help at the margin to boost exports over
the near term.

“We think that these factors alone would be enough to take the
edge off concerns about the external position,” Shah said. “But
the government has gone a step further by announcing late on
Friday that restrictions on ‘non-essential’ imports would be
imposed in order to reduce the current account deficit and
provide some support to the rupee.”

Ministry of Commerce data out Friday showed
India’s monthly deficit retreated from a five-year high of
$18 billion in July to $17.39 billion in August. 

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