New Delhi: Attributing the slump in stock and currency markets to external factors, a finance ministry official Wednesday said more steps will be taken to check current account deficit (CAD) and hoped that the rupee would appreciate.
While the stock market benchmark Sensex in the early trade Thursday crashed over 1,000 points, the rupee fell to a record low of 74.45 to a dollar.
“What happened in the US yesterday had a ripple effect here today. The IMF has downgraded global growth rate, US growth rate for next year, both these had an impact on markets,” the official told reporters.
The government will take action at an appropriate time to check widening CAD and going forward there are indications that oil prices will fall, which will have positive implications on the rupee.
“Rupee, Balance of Payments, CAD are the main worries, we have a strategy in place to tackle the situation. We will take action at the opportune time on these issues,” the official said.
He said the Indian market is still relatively stable compared with other equity markets. “The rupee may remain firm if oil prices stay range bound. We do believe that rupee should appreciate from this level,” the official added.
The rupee has lost more than 13% since the beginning of 2018. The CAD, difference between inflow and outflow of foreign exchange, widened to 2.4% of GDP in the April-June quarter.
The official said that the oil prices are expected to stay range bound between 79-85 dollar a barrel in the months to come and the Indian economy will gain in the US-China ‘trade war’.
Even though there are pressures on the current account deficit, the foreign exchange reserves are good enough to withstand it, he added.
He also said that the IMF has downgraded GDP projections for the US and China and hence India stands to gain.
The US Dow Jones Industrial Average slumped over 800 points or 3.15% Wednesday, its biggest fall since February. US President Donald Trump blamed the drop on US Federal Reserve’s decision to hike interest rates. “The Fed has gone crazy,” Trump said yesterday.
Taking a cue, the Asian stock indices too witnessed selling frenzy. Japan’s Nikkei declined 4%, Australia’s benchmark ASX 200 fell 2%, and Hong Kong’s Hang Seng, China’s Shanghai Composite was down more than 3%.