India’s Rupee Drops Most in More Than a Week on Deficit Concern
The currency fell for the first time in five days after the Controller General of Accounts said on its website yesterday that revenue collections were 37.2 percent of the annual target in the six months through September, compared with 58.4 percent achieved a year earlier. Policy makers’ success in cooling India’s inflation, which has stayed above 9 percent this year, depends on the government’s ability to narrow its shortfall, the central bank said last week.
“The fundamental backdrop of high inflation and India’s twin deficits is likely to weigh on the rupee as we move towards the end of the year,” said Jonathan Cavenagh, a currency strategist in Singapore at Westpac Banking Corp.
The rupee declined 1.2 percent to 49.2650 per dollar in Mumbai, according to data compiled by Bloomberg, the biggest drop since Oct. 20. It advanced 0.6 percent last month, the first gain since July.
The government’s revenue collection may have slowed as economic growth decelerated to 7.7 percent in the second quarter, the slowest pace since 2009. The budget deficit in the six months through September was 70.8 percent of the annual goal, according to the Controller General of Accounts. The government increased its borrowing target for the second half of the fiscal year by about 32 percent in September.
Finance Minister Pranab Mukherjee plans to cut the budget gap to a four-year low of 4.6 percent of gross domestic product by March. The nation’s current-account deficit jumped to $14.1 billion in the three months ended June 30 from $5.4 billion in the previous quarter, according to government data.
Offshore forwards indicate the rupee will trade at 50.04 to the dollar in three months, compared with expectations for a rate of 49.45 yesterday. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.
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