Millennium Post

‘Rupee fall not a cause of alarm, will soon stabilise’

Unfazed by the rupee touching psychological level of 57 against the US dollar, Finance Minister P Chidambaram on Thursday said there is no cause for alarm and the currency will soon find its stable level.

'There is no alarm bell on the Rupee front. I think rupee will soon find its stable level. (Foreign) Inflows are good in past two months, it was extremely good,' he told reporters on the sidelines of an event here.In the past eight days, rupee has weakened by over 150 paise against the dollar, amidst concerns of withdrawal of stimulus by the US administration. The domestic currency had touched a record low of 57.32 in late June last year. Supported by portfolio capital inflows and various reform measures announced during the period, the rupee remained strong during December 2012 to early-February 2013.

However, the rupee witnessed some weakness during the second week of February to early March. It gained some strength to remain largely range-bound and saw subsequent appreciation during April 2013. Rupee started its downward journey against the dollar in May and hit 11-month low levels. The Finance Minister also expressed confidence that India would be able to finance its CAD from foreign investments without touching it forex reserves.

'I hope that in future also by encouraging foreign investment we will be able to finance the CAD without drawing down on our foreign exchange reserve,' he said.He was also hopeful that with fall in inflation other financial instruments will become attractive and 'divert some of the disproportionate attention in gold to fixed income instruments'.
Earlier this month, the government came out with the first issue of inflation indexed bonds, which aims at discouraging gold investments.
Chidambaram also asked banks to pass on the benefit of RBI rate cut to borrowers due to easing of inflation.
'As CPI inflation and deposit rates fall, I would urge Commercial banks to translate monetary policy to retail borrowers and firms through lower lending rates'.

The Finance Minister said that both the wholesale price based inflation as well as core inflation have fallen sharply, even though the retail or CPI inflation is still high.
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