The free-fall of the rupee against the dollar is costing the economy hard and crude oil import cost coupled with debt financing to take away an additional Rs 1 lakh crore.
A State Bank of India (SBI) research report says, there could be other worries as RBI raising rates will have an adverse impact on consumption and investment expenditure. Gilt yields crossing the 8-per cent level, will make higher fiscal costs.
The rupee depreciated was around 13 per cent this year and alongside has been the rising crude oil price. The report, Ecowrap, estimates that 80 per cent of crude is imported and the cost this fiscal could be around $57 billion. This is on the assumption that 0.76 billion barrels for the rest of the year when the average price would be $74.24 per barrel.
"If the average exchange rate remained at Rs 65.1 per dollar, the crude oil import bill would have been Rs 3,64,300 crore. However, with the rupee depreciating to an average of Rs 71.4 per dollar in the second half of 2018, the import bill will increase to Rs 4,03,600 crore, implying an extra cost of around Rs 39,300 crore," the report added.
If the average exchange rate of the rupee falls to 73 to against the greenback, the extra cost will rise to Rs 45,700 crore.