The Finance Ministry has put on hold a proposal to increase pay for 10 million central government employees and pensioners beyond the recommendations of 7th Commission for the time being because the rupee has plunged to record lows, shedding more than 12 percent during the year.
At present, the rupee is the worst performing Asian currency.
A weak currency is likely to widen India’s current account deficit further (CAD). A falling rupee versus the dollar increases the cost of imports and increases export revenues in rupee terms.
The current weakness in the rupee is mostly attributed to widening CAD, which is higher due to the crude oil import bill.
A senior Finance Ministry official told that the time is not ripe to enhance pay as oil import bill of the country rose over 50 percent in the first four months of this fiscal as against the same period last year. Currency weakness is likely to result in inflationary pressure as well.Read the article at The Sen Times