Pranab, RBI chief discuss sharp fall in rupee

With rupee weakening to a 28-month low of Rs 50 to a dollar, Finance Minister Pranab Mukherjee on Friday discussed the issue with the Reserve Bank Governor D Subbarao.

The Reserve Bank of India chief also reviewed the high-level of inflation with the Finance Minister, ahead of the quarterly review of monetary policy next week, amidst expectations of another hike in key interest rates.

"The Governor of RBI will come and I will discuss with him this (rupee weakening) issue", the minister said earlier in the day.

The Indian rupee plummeted by 27 paise to a 28-month low of Rs 50.07 per US dollar in the Interbank Foreign Exchange.

A weak rupee aggravates the inflationary pressure as landed cost of imported commodities goes up.

The country depends on imports to meet 80

per cent of its crude oil requirement. It also imports a large quantity of vegetable oils and pulses.

The food inflation, which hurts people most, had crossed the double-digit mark for week ended October 8.

The general inflation, measured by movement in the wholesale prices, has remained stubbornly over 9 per cent since December 2010.

The Reserve Bank of India has already raised the benchmark interest rates by 350 basis points since March 2010.

However, a strong dollar is a cause of celebration of exporters, who have shown a good performance.

The exports have grown by over 50 per cent during April-September despite weak demand in the US and Europe.

RBI had earlier intervened briefly in the forex market to check rupee slide, even when it wants the market forces to determine the currency value.