According to an unnamed official source, India will address the issue of rupee's volatility

5 Jul 2022 , 12:06 PM

A government official said on Monday (04-07-2022) that India is attempting to "address volatility" in the Indian rupee, which has fallen to record lows against the dollar in recent weeks on worries about a growing trade imbalance and the selling of assets by foreign investors.

Due to widespread dollar strength and investors' flight from the local stock markets, the rupee has lost 6 percent of its value versus the dollar this year.

In contrast, rising commodity prices caused India's trade deficit to reach a monthly record high of $24.3 billion in May.

"There is no doubt that the CAD (current account deficit) will increase while oil prices are this high. India has been bridging CAD with capital flows during the past few years. There are obstacles to capital flows this year "The official, who wished to remain unnamed, told journalists.

The partly convertible rupee was trading at 78.95/96 per dollar as of 10:13 GMT, not far from the fresh record low it hit on Friday.

However, the official said that India's macroeconomic fundamentals were still sound and that he was "pretty sure" that India would fare well when things got better. The source said that the government will maintain its budget deficit goal of 6.4 percent of GDP for the fiscal year 2022—2023, which began on April 1.