The Indian rupee has dropped to a historic low of 81.09 to the dollar. This will make it more costly to import crude oil and other goods, which would further increase inflation. The pressure on the local currency is anticipated to remain strong as the trade gap widens and institutional investors gradually remove their capital.
The Reserve Bank of India is anticipated to raise the repo rate, or short-term lending rates, by 50 basis points in an effort to reduce inflationary pressure when it announces its bi-monthly monetary policy later this week. A falling rupee has an impact on local fuel prices in a country where imports account for 85% of its oil consumption and 50% of its gas needs.