Attributing the weakening of rupee to uncertain global economic environment, the Finance Ministry said it will increase inflationary pressure by pushing up import bill.

Mr Namo Narain Meena minister of state for finance said in a written reply to the Lok Sabha said that "The rupee decline makes oil imports more expensive, contributing to inflationary pressures. The rupee cost of other imports would also rise, thereby contributing to price rise.”

The rupee has weakened 18% against dollar so far in 2011 and had touched a historic low of 52.73 on November 22. The rupee was trading at 55.22 against dollar in the afternoon trade today.

Mr Meena said that "The main reason for depreciation of rupee against US dollar is uncertain global economic environment, particularly unfolding of eurozone sovereign debt crisis.”

He added that the fluctuation in rupee exchange rate is due to demand-supply mismatch.

Mr Meena added that "Though in the long run, the Rupee fall would benefit exporters through higher export earnings and improved competitiveness vis a vis other emerging economies, the decline in the value of Rupee would have detrimental effect in the short run.”

(Sourced from FE)