Mumbai, May 18: The steep fall in rupee may put some inflationary pressures on the economy as the cost of imports would go up, experts said yesterday.
“Though crude prices have been falling in recent past, decline in the rupee is offsetting its positive impact. I feel, the current spate of depreciation of the rupee is somewhat inflationary due to rise in import costs,” Crisil chief economist DK Joshi told PTI here.
The rupee, which touched a life-time low of 54.50 to the dollar yesterday, has lost over 22 percent year-on-year on the back of falling capital inflows owing to the Eurozone problems coupled with structural issues faced by the domestic economy such as record high current account deficit and rising fiscal deficit.
Joshi, however, said softening of global commodity prices will be crucial to determine the import cost for the country in the near future.
Deloitte India senior director Anis Chakravarty also agreed saying though the depreciating rupee may not impact inflation numbers directly, it will have an indirect impact.
“Inflation is more domestic factors driven than on the rupee value. However, rupee depreciation will worsen the current account deficit position, which is at 4 percent of GDP as of now,” he said.
He also said steps like hike in petrol and diesel prices to bridge the rising fiscal deficit numbers will influence inflation numbers.
The experts also pointed out that decline in the rupee will worsen the trade deficit situation, which has grown to USD 184.9 billion in FY12 against USD 118 billion in FY11.
“Though currency depreciation will not have any immediate impact on inflation, it will negatively influence other economic parameters,” Brickwork Ratings director D Ravishankar said.
