India to address volatility in rupee

India is trying to “address volatility” in the Indian rupee that has tumbled to record lows against the dollar in recent weeks, a government official said on Monday, amid concerns of a widening trade deficit and sell off of assets by foreign investors.

The rupee has plunged 6 per cent against the dollar this year, weighed down by broad strength in the greenback and as investors retreated from the domestic share markets.

Meanwhile, India’s trade gap touched a monthly record of $24.3 billion in May hurt by higher commodity prices.

“When oil prices are this high, obviously CAD (current account deficit) will go up. Last several years India has been bridging CAD with capital flows. This year there is headwinds on capital flows,” the official who did not want to be named, told reporters.

As of 1013 GMT, the partially convertible rupee was trading at 78.95/96 per dollar, close to new record low it touched on Friday.

The official, however, said India’s macro economic fundamentals remained strong and he was “fairly confident” that India would come out of “well” when the situation improved.

The official also said the government would stick to the fiscal deficit target of 6.4% of GDP for the 2022/23 financial year that started on April 1. (Reporting by Manoj Kumar; Editing by Toby Chopra and Alison Williams)

Meanwhile the Indian shares recovered early losses to close higher on Monday as consumer stocks gained after commodity prices tumbled, overshadowing a selloff in metal companies due to worries over waning demand from top consumer China.