As the rupee fell to a record low against the US dollar, the Finance Ministry remained unfazed , stating that the “panic” in the forex market was “unwarranted”.
Ruling out any measures for now, the Economic Affairs Secretary Arvind Mayaram pointed out that most currencies had weakened against the US dollar and that rupee was no exception to this trend.
The rupee, on Monday, fell to an all-time low of Rs 57.73 trailing the US dollar’s strength globally on data showing China’s economy losing momentum and better-than-expected US jobs data.
The better US jobs data had renewed expectations that Federal Reserve might curb its asset purchase later this month.
“I think this (sharp fall in rupee) is a panic in the market, which is unwarranted. I don’t think we should unduly get worried. We are watching the situation,” Mayaram told reporters here.
Even as he sought to cool the frayed nerves of forex market participants, there is a strong buzz in the Capital that the Government may further ease procedures for foreign investors buying Government securities.
This could be part of ongoing measures to boost capital flows into the country and help finance a current account deficit, which is estimated to have touched 5 per cent of GDP in 2012-13.
Mayaram said the rupee slide started with the “misinterpretation” of US Federal Reserve Chairman Ben Bernanke’s statement on quantitative easing.
Quantitative easing
“They (US Fed) have more than clarified that the early withdrawal of quantitative easing was not imminent, neither is it going to be something which will happen quickly,” Mayaram said, adding that things would settle down in a while on the currency front.
Asked whether the Government intends to further hike the FII investment limit on Government securities, Mayaram said this was not an imminent decision in the wake of the rupee fall.
“We continue to watch the situation and will take decision as and when it is required”.
Mayaram also said that the Government would continue to woo sovereign wealth funds to invest in India.
The strategy to attract sovereign wealth funds is not just on account of what is happening to the rupee at the moment.
“We will continue to attract sovereign wealth funds as we require investments in the country. We need to attract long-term funds in any case. So I think we will continue to do what we were also doing in the past (attracting sovereign wealth funds)”, Mayaram said.
Raghuram Rajan, Chief Economic Advisor to the Finance Ministry, indicated that more measures to curb current account deficit was on the anvil. He also felt that the rupee’s fall against the dollar was a temporary phenomenon.