Weakening rupee to make import of crude oil, commodities expensive

The Indian rupee sliding to a historic low of 81.09 to a dollar will make import of crude oil and other commodities expensive further fueling inflation which for the past several months has remained above the Reserve Bank's upper tolerance level of 6 per cent.

The pressure on the domestic currency, which is mainly due to repeated hikes in interest rate by the US Fed, is likely to continue with rise in trade deficit and gradual withdrawal of funds by institutional investors.

The Reserve Bank, which is scheduled to announce its bi-monthly monetary policy later this week, is expected to increase the repo-rate or the short-term lending rates by 50 basis points in a bid to tame inflationary pressure.

For a nation that is 85 per cent dependent on imports to meet its oil needs and 50 per cent for gas requirements, a weakening rupee has a bearing on domestic price of fuel.

India's trade deficit more than doubled to USD 27.98 billion in August due to increased crude oil imports. Import of .