India's economic gloom deepened on Wednesday as figures showed a record low rupee is adding to Reserve Bank of India's (RBI) inflation headache and an adviser to the prime minister said there was little that could be done to check the currency's slump.
An 18 percent slide in the value of the rupee since July is adding to a growing worry of economic crisis in the country as stubbornly high inflation ties the hands of the central bank from easing policy to try to turn a grim economic outlook.
A worsening fiscal picture means the government's financial firepower is also limited.
Parliament is in gridlock, preventing approvals for investment that could help offset a ballooning current account deficit.
Indeed, C Rangarajan, chairman of the Prime Minister's Economic Advisory Council, suggested there was little policymakers can do to counter the slide in the currency.
He said the rupee was subject to the whims of global investors, who are buying the dollar as a safe haven from the euro-zone debt crisis.
"The behaviour of the rupee is also a reflection of the behaviour of the dollar," he said. "There is very little that can be done."
Data on Wednesday showed wholesale prices, the main gauge of inflation in India, rose 9.11 percent in November from a year earlier. That showed inflation actually fell from 9.73 percent in October thanks to a sharp pull back in food price pressures.
However, fuel inflation rose to 15.48 percent from 14.79 percent and manufacturing inflation increased to 7.7 percent from 7.66 percent as the tumbling rupee pushed up import costs.
Image: A thoughtful Manmohan Singh seen in this file photo.
Text: Tony Munroe and Manoj Kumar, Reuters