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Indian Rupee has fallen to abysmally low levels and has touched 62.40 against Dollar in the initial hour of trade. This is a record low for the currency which is getting battered time and again as Dollar flight continues amid fears of a QE tapering by the US Federal Reserve as soon as September.

This particular fear has led to a spike in interest rates in the US causing an exodus of USD from India as investments there turn out to be much more attractive.

Commodities, meanwhile are expected to trade bullish for the day as Purchasing Power of Rupee diminishes.

India govt bond yields stand at 21 month highs even as 10 year-bonds attract 8.95%.

India government had taken a number of steps to arrest the Rupee decline and to narrow the Current Account Deficit of the nation. This also included spiking of import duty on gold, silver and platinum to 10%.

Unless the government is able to rein in the Current Account Deficit by means of curtailing gold imports and giving uop fuel subsidies, the Rupee would continue to fall, experts say.

The govt. hiked gold import duty to 10%–fifth hike in a year– and silver import duty to 10% from 6% on Tuesday, last week along with that of platinum. Excise duty on refined gold bars has been hiked to 9% from 7%. The nation imported 845 tons of gold in 2012-13 which amounted to Rs 2,45,862 crore.

India govt Revenue Secretary Sumit Bose was cited by The Indian Express as saying on Tuesday last week, “Imports of gold and silver have witnessed a huge surge in the recent months, the imports of gold increased from 205 metric tonne in April-July 2012 to 383 metric tonne in April-July 2013, an increase of 87 per cent.”

India’s Finance Minister P.Chidambaram had, prior to that noted that government will reduce the imports of non-essential commodities and commodities like gold, silver, and oil to prevent Current Account Deficit from going above 3.7% of GDP in the current fiscal.

“CAD will be contained at $70 billion, while the inflows will increase to a level that will be sufficient to finance the CAD. If the CAD is contained at $70 billion, it will amount to 3.7% of the GDP (as against 4.8% in 2012-13),” he said in a statement and was cited by the Business Standard.

“We believe that we have to do more to contain CAD, to reduce volatility in the currency market and to stabilise the rupee.” he had said.

Meanwhile Indian PM Manmohan Singh is favouring a re-invention of India’s monetary policy.

“I would venture to think that the time has come, when we should revisit some of those areas – the possibilities and limitations of monetary policy in a globalized economy, in a fiscally constrained economy – I think that is one subject. But macro-economic policy-making, targets and instruments, I think, is another area, where I feel fresh thinking is called for, and I sincerely hope that the Governors of the future, particularly Dr. Raghuram Rajan, will attempt to revisit some of these difficult areas,” he was speaking to on releasing a Volume: “History of the RBI.”

Meanwhile, the government in a swish of a magic wand has cleared a number of infrastructure projects worth Rs.1.1 trillion which had been awaiting government go-ahead. The move is widely expected to boost commodity demand in India across board.

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