Asserting that the rupee price will be market-determined, Finance Minister P Chidambaram said on Tuesday that Monday night’s measures by the Reserve Bank of India (RBI) have nothing to do with the coming monetary policy review and may not impact interest rates of banks. The RBI’s measures, he said, were aimed at checking excessive volatility and speculation in the forex market.
‘These measures (RBI decisions) should not be read as prelude to any policy rate changes. This has nothing to do with the upcoming policy review of the RBI.... I don’t expect banks to increase interest rates as a result of Monday’s measures” Chidambaram said at a press conference in Jaipur.
The RBI on Monday night announced a slew of measures like raising the cost of borrowing by banks by 2 percentage points to 10.25 per cent and announcing sale of bonds worth Rs 12,000 crore through open market operations to suck liquidity to check the sliding rupee, which had touched a record low of 61.21 to the dollar earlier this month .
‘The measures are taken to curb excessive speculation and reduce volatility and stabilise the rupee,’ Chidambaram added. The value of the rupee, he said, will depend upon ‘how much foreign exchange we earn and how much foreign exchange we spend’.
Admitting that there will be some depreciation of the rupee in view of the high current account deficit (CAD) and inflation, Chidambaram said the that the value of the domestic currency will be market- determined and it will find its price. ‘We know that there is sometimes excessive speculation in the forex market. Excessive speculation leads to volatility in the market. So what any central bank or RBI and government can do or should do is ensure that volatility is reduced...and there is not too much speculation in the forex market,’ he said.
The initiatives announced by the RBI, he elaborated, are ‘intended to quell excessive speculation in the forex market and reduce volatility in the forex market. These measures should not be read as a prelude to any policy rate changes. This has nothing to do with policy rate changes’.
The RBI is scheduled to announce its first quarter Monetary Policy Review on July 30 amid demands from industry to cut interest rates to boost sagging growth. Chidambaram said that the measures were taken by the RBI in consultation with the government and ‘both are on board’.
Referring to growth, Chidambaram stressed that the measures taken by the RBI ‘will in no way affect our commitment to growth. We must increase credit delivery and must stimulate growth’.
In the current fiscal, he said, the growth rate would be over 6 per cent, higher than the 5 per cent recorded in fiscal 2012-13. ‘This year, by all estimates, it (the growth rate) will be 6 per cent or slightly above. This is not a satisfactory level of growth...’ he said, attributing the moderate increase in growth to the slowdown in the advanced economies.
‘These measures (RBI decisions) should not be read as prelude to any policy rate changes. This has nothing to do with the upcoming policy review of the RBI.... I don’t expect banks to increase interest rates as a result of Monday’s measures” Chidambaram said at a press conference in Jaipur.
The RBI on Monday night announced a slew of measures like raising the cost of borrowing by banks by 2 percentage points to 10.25 per cent and announcing sale of bonds worth Rs 12,000 crore through open market operations to suck liquidity to check the sliding rupee, which had touched a record low of 61.21 to the dollar earlier this month .
‘The measures are taken to curb excessive speculation and reduce volatility and stabilise the rupee,’ Chidambaram added. The value of the rupee, he said, will depend upon ‘how much foreign exchange we earn and how much foreign exchange we spend’.
Admitting that there will be some depreciation of the rupee in view of the high current account deficit (CAD) and inflation, Chidambaram said the that the value of the domestic currency will be market- determined and it will find its price. ‘We know that there is sometimes excessive speculation in the forex market. Excessive speculation leads to volatility in the market. So what any central bank or RBI and government can do or should do is ensure that volatility is reduced...and there is not too much speculation in the forex market,’ he said.
The initiatives announced by the RBI, he elaborated, are ‘intended to quell excessive speculation in the forex market and reduce volatility in the forex market. These measures should not be read as a prelude to any policy rate changes. This has nothing to do with policy rate changes’.
The RBI is scheduled to announce its first quarter Monetary Policy Review on July 30 amid demands from industry to cut interest rates to boost sagging growth. Chidambaram said that the measures were taken by the RBI in consultation with the government and ‘both are on board’.
Referring to growth, Chidambaram stressed that the measures taken by the RBI ‘will in no way affect our commitment to growth. We must increase credit delivery and must stimulate growth’.
In the current fiscal, he said, the growth rate would be over 6 per cent, higher than the 5 per cent recorded in fiscal 2012-13. ‘This year, by all estimates, it (the growth rate) will be 6 per cent or slightly above. This is not a satisfactory level of growth...’ he said, attributing the moderate increase in growth to the slowdown in the advanced economies.