India worried about rupee drop, mulls tapping citizens overseas

India expressed concern about the rupee’s decline for the first time and said it’s considering a plan to tap its citizens overseas, according to a government official.

The local currency, Asia’s worst-performing major so far this year, which plunged as much as 1.3 percent to a record low Monday, pared losses after the comments. The relief may be temporary given concerns about a widening current account and trade gap on the back of elevated prices of oil, India’s biggest import item.

The finance ministry and the Reserve Bank of India are in touch and the central bank is intervening in the currency market when needed, the government official told reporters in New Delhi on Monday, asking not to be identified citing rules. The RBI has been selling dollars, albeit in a restrained manner, leading to a drop in India’s foreign exchange reserves to $400 billion from a record high of $426 billion in mid-April.

The official said India’s reserves position was comfortable and authorities could take measures such as tapping overseas Indians and other moves to plug the current account gap. In 2013, the central bank lured inflows of about $34 billion through discounted foreign-currency swaps, helping lift the rupee from a record low.

Data on Friday showed, India’s current account deficit widened to a five-year high, with little respite in store amid a yawning trade gap. The trade data for August due out later this week are likely to show that imports, especially costly crude, outpaced exports.

The gap for last month is likely to come in at $17.45 billion, according to a Bloomberg survey, compared with $18 billion in July and much worse than the average $15 billion in the April-June quarter amid higher oil prices. The crude import bill for the world’s fastest-growing oil user surged 76 percent in July from a year earlier, highlighting the rupee’s vulnerability.