India's macroeconomic fundamentals are strong to deal with global challenges and the central government is committed to sticking to the fiscal deficit target of 6.4% of the GDP for the current fiscal, official sources said on Monday.
The government is taking steps to deal with the spiralling crude oil prices in the international market, the sources said.
India meets close to 85% of its oil demand through imports and a weaker rupee makes imports costlier.
Commodity prices, including of crude oil, are ruling high due to the ongoing Russia-Ukraine war and have led to inflationary pressures across countries, including India.
The government was committed to adhering to the fiscal consolidation path and the Budget this year had pegged the fiscal deficit at 6.4% of the GDP, sources said, adding that steps were being taken to address the situation arising out of rising crude oil prices.
While acknowledging that there were strong global headwinds, the sources said the country's macroeconomic fundamentals were strong enough to deal with challenges.
Sources said the current account deficit (CAD) was expected to be high as crude oil prices were high.
For the past several years, sources said, India had low CAD but this year there was headwind on that front. However, the macroeconomic situation and forex reserve were better than in the past.
On the rupee depreciation, sources said the dollar was appreciating vis-a-vis all other currencies and appreciation against the rupee had been the least among peers.
There is no comfortable level for the rupee in mind but market forces would decide the stable value, sources said, adding that the monetary authority does intervene in the forex market to smoothen out sharp volatility.
Asked about the government's recent measures to impose taxes on fuel and gold, sources said the government was taking a part of the windfall profit from unexpectedly high prices. The government imposed a $23,250 per tonne tax on crude oil produced domestically.
Domestic crude producers sell crude to domestic refineries at international parity prices. As a result, domestic crude producers are making windfall gains. Taking this into account, a cess of ₹23,250 per tonne had been imposed on crude. Import of crude oil would not be subjected to this cess.
Additionally, a ₹6 per litre tax on the export of petrol and ATF and ₹13 per litre tax on the export of diesel was effective from July 1.
On the revenue mobilisation from these measures, sources said, it was difficult to put a number.
Calculations are based on assumptions, sources said, adding that ‘no one can say what the price of crude oil would be tomorrow’.
Sources also said that curbs on exports of some items had been imposed to cool down prices in the domestic market.
