What keeps rupee under pressure against dollar

The Reserve Bank of India announced details on balance of payment. Balance of payment is typically the sum of all transactions made between nations for a specific duration. These transactions indicate why there is a pressure on the rupee. For the year ended March 2012, India's balance of payment slipped to negative $ 10.4 bn against the surplus in 2010-11 of $ 25.8bn.

Here are things you need to know that influence the rupee movement:

• India’s current account deficit widened to $ 21.7 bn in the quarter to March 2012. It was $19.6 billion in the December quarter, higher t han $9.7 billion a year earlier. The deficit has been widening steadily since the start of the fiscal year in April as exports slumped and imports rose. Rising global oil prices pushed up import bills for Asia's third-largest economy, which sources more than 80 per cent of its oil overseas.

• India’s trade deficit for the quarter to March 2012 stood at $ 50bn. This is the net of imports and exports. India imports more goods and services than exports and hence runs a current account deficit. Imports rose 22.6 per cent while exports rose 3.4 per cent. The trade deficit widened to US$ 189.7 billion in 2011-12 from US$ 130.4 billion in 2010-11.

• “The trade deficit increased primarily because of the slowdown in global demand and the inelastic nature of oil imports. Pressures on the deficit were further aggravated by the fact that the non-oil imports remained high,” RBI said in its annual financial stability report.

• During the financial year 2011-12, while growth in exports decelerated sharply to 23.6 per cent (37.5 per cent in 2010-11), imports grew by 31.1 per cent as compared with 26.7 per cent in the previous year, mainly reflecting higher imports of oil and gold & silver.

• Imports of oil, which grew by 46.9 per cent, and of precious metals which grew by 49.4 per cent, together contributed nearly 45 per cent of total imports during the year. Notably, international price of the Indian basket of crude oil increased from US$ 85.1 per barrel in 2010-11 to US$ 111.9 per barrel in 2011-12.

• The current account deficit (CAD) at $ 78.2 billion was 4.2 per cent of GDP in 2011-12 as compared with US$ 46.0 billion or 2.7 per cent of GDP during the previous year. The rise in CAD-GDP ratio was also resulted from slower GDP growth and its contraction in dollar terms due to depreciation of rupee.