Rupee nears 74 per dollar on fears over central bank showdown

The infighting between India’s central bank and federal government has had a collateral damage on an already ailing rupee. Indian rupee resumed its downward slide yesterday on reports that the Reserve Bank of India’s governor Urijit Patel made calls for greater autonomy to the central bank.

“The current political conflict between the government and the central bank does not inspire confidence in the rupee. The dispute sheds light into the unique relationship that the Indian government has with the banking system,” Zaid Alasad, Chief Investment Officer, Harbour Wealth Management said.

The finance ministry started interfering by asking the central bank to cut interest rates to prop-up the economy, which was beaten down due to demonetisation and implementation of the Goods and Services Tax (GST), at a time when inflation was high. The rift was out in the open when Viral Acharya last week called for greater autonomy to the central bank.

The rupee touched a low of 74.1450, the lowest since October 15, before closing 0.38 per cent lower at 73.955. The fall was restricted due to stable prices of brent crude

The benchmark BSE Sensex index closed 1.63 per cent higher by 551 points at 34,442.05.