Finance Ministry Continuously Monitors Rupee Amid Geopolitical Uncertainties

Rupee Monitoring Intensifies Amid Fiscal Deficit Concerns

The finance ministry is closely monitoring the rupee's value against the US dollar on an hourly basis to assess its impact on the economy and the Centre's fiscal math amidst the ongoing conflict in the Middle East. According to recent data, the rupee has depreciated around 2.63% against the US dollar since the start of 2026, following a depreciation of 5% in 2025.

92.33, the record-low level of the rupee against the US dollar on Monday, has raised concerns that the fiscal deficit target of 4.3% for FY27 may become difficult to meet. The finance ministry had not anticipated the rupee to reach this level when making Budgetary assumptions. If the rupee sustains at 93 to the US dollar, it may impact the Centre's fiscal deficit target for the next financial year.

The weaker rupee is expected to push up the fertilizer subsidy bill, which is already under pressure due to supply chain disruptions caused by the conflict in the Middle East. India imports approximately 30% of its fertilizer requirement, and a 1% fall in the rupee adds around Rs 1,500-2,000 crore to the subsidy bill if global prices remain high. The fertilizer subsidy outlay for FY27 has been pegged at Rs 170,799 crore, and the finance ministry will reassess the Budget's numbers after the first quarter of FY27.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

The depreciating rupee also impacts LPG subsidy. In FY26, the Revised Estimate (RE) was higher than the Budget Estimate (BE) by around Rs 3,000 crore. For FY27, the BE has been pegged at Rs 12,084 crore.