The Indian rupee continues to weaken against the US dollar. On Tuesday, it hovered around 95.36 in early trading. Since the beginning of this year, the currency has fallen by around 5.64 per cent.
Pressure on the Indian rupee predates the Iran war in West Asia. Last year, it fell by roughly 5 per cent against the dollar. The problem exists on both the current and capital accounts.
Global crude oil prices remain elevated due to energy market dislocations. Brent crude is currently around $113 per barrel. In April, the Indian crude oil basket averaged $114.48 per barrel, according to data from the Petroleum Planning and Analysis Cell. The current account deficit may widen to around 2 per cent in 2026-27.
So far this calendar year, foreign portfolio investors have withdrawn around $21.2 billion from stock markets. This follows outflows of $18.9 billion last year. While the Reserve Bank of India has taken steps to ease rupee stress, its short dollar position has swelled and pressure persists.
Retail fuel prices have not yet adjusted to higher global levels, but oil companies and the government face limits to the burden. The war has lasted more than two months. Pump prices will push up retail inflation, which edged up to 3.4 per cent in March. Commercial LPG cylinder prices rose by Rs 993 a few days ago.
