Indian rupee hits record low; worries over inflation rise

The Indian rupee fell to more than 80 per US dollar for the first time on record on Tuesday, raising concerns about imported inflation.

The rupee hit 80.0600 against the US dollar in early trade, Bloomberg data showed, before paring losses on suspected central bank intervention to close at 79.9487.

Tighter US monetary policy has exacerbated outflows from emerging markets such as India, where foreign investors have withdrawn a net $31 billion in debt and equity this year.

In a written statement to the Indian parliament on Monday, finance minister Nirmala Sitharaman attributed the rupee's sharp fall to external reasons.

"Global factors such as the Russia-Ukraine conflict, soaring crude oil prices and tightening of global financial conditions are the major reasons for the weakening of the Indian Rupee against the US dollar," she said.

At the same time, the Indian currency has strengthened against the British pound, the Japanese yen and the euro in 2022 so far, Sitharaman added, according to AFP.

In a Twitter post last week, Sanjeev Sanyal, Member, Economic Advisory Council to the Prime Minister, had said, “The RBI is using reserves to smoothen move but correctly allowing market adjustment… the only real cause for concern is imported inflation from energy prices. Given oil import dependence, there is little India can do about this in short term beyond some domestic adjustments (say cutting taxes at the margin) but all such measures have a price.”