Economic malaise leaves India's rupee vulnerable
was $20 billion, the second highest ever, piling pressure on a widening current account gap.
The central bank is worried that India's ability to fund the current account shortfall is becoming increasingly stretched, and could lead to fresh pressure on the rupee.
"We are financing our current account deficit through increasingly volatile flows," Reserve Bank governor Duvvuri Subbarao said on Monday.
The central bank's policy options are themselves arguably limited.
The Reserve Bank cut its benchmark interest by 25 basis points to 7.75 percent on January 29, but struck a cautious note on further easing given the current account deficit.
Given that India's consumer price inflation edged higher to 10.79 percent in January from 10.56 percent a month ago, data showed Tuesday, the central bank's note of caution may be have been doubly prescient.
The Indian rupee looks exposed.
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