New Delhi: The depreciating rupee against dollar plunging to nearly 33-month low of sub-52 level on Monday, can further add to the woes of the country’s weakening economy. The Reserve Bank of India’s timely interference has also failed to save the falling rupee. Now, even the government has hinted its helplessness in controlling the prevailing trend.
 
According to experts, the downward trend of rupee may continue further adding to the retarding economy and can spoil the government efforts to control the escalating inflation. Expressing the inability of the government in controlling the situation, Economic Affairs Secretary R Gopalan said, "RBI's ability to intervene in forex market is limited."

For the record, the Indian currency was witnessing a continuous fall from the past one month but the government is unable to intervene. Though the RBI intervened to an extent on Monday but observing the mood of the market, it has checked itself. At the time of market closure, Rupee was 51.71 per dollar.

Experts are of the opinion, with no sign of improvement in the global economy and running away of Foreign Institutional Investors (FII) from the Indian market, the RBI is helpless in utilizing its foreign exchange reserves.

Assocham General Secretary DS Rawat said, “India’s foreign exchange reserve is not so vast that it can allow RBI to be active in preventing the fall of rupee. In the present situation, the RBI can merely play a role in preventing speculative trading.”

According to the traders involved with foreign market, along with the FII, oil companies are also buying dollar on a large scale. The oil companies believe that the crude oil prices may soon witness a rise and are therefore investing heavily in the future trading.

Moreover, this move by the oil companies is discouraging the government efforts in controlling inflation. The losses of the oil companies can be compensated by a counter move of costlier petroleum products in the domestic market. And if the government thinks of extending help to the oil companies, the step will further add to fiscal deficit and therefore ultimately enhance inflation.

The continuous fall of rupee has led to costlier imports with capital goods, automobiles and IT companies which are the worst sufferers of the negative trend.

JPN/Bureau