India is trying to "fix" the volatility of the Indian rupee against the US dollar, a government official said today.The Indian rupee has fallen to record lows against the dollar in recent weeks on worries about a widening trade deficit and asset sales by foreign investors.
The rupee has fallen 6 percent against the dollar this year, weighed down by a broad-based dollar strength and investors pulling out of domestic equities.
Meanwhile, India's trade deficit hit a monthly record of US$24.3 billion (RM107 billion) in May, hurt by higher commodity prices.
"When oil prices are this high, the current account deficit is clearly going up. India has been linking CAD to capital flows for the past few years. This year, capital flows are facing headwinds," the official told reporters on condition of anonymity.
The partially convertible rupee was at 78.95/96 against the dollar by 1013 gmt, near a record low hit on Friday.
However, the official said India's macroeconomic fundamentals remained strong and he was "fairly confident" that when the situation improved, India would come out of the woods "well."
The official also said that in the 2022/23 fiscal year, which begins on April 1, the government will stick to its target of a fiscal deficit of 6.4 percent of GDP.
