Use forex reserves to check rupee slide: PMEAC
15 May 2012 3:59 AM GMT
The Prime Minister’s Economic Advisory Council (PMEAC) chairman C Rangarajan on Monday pitched for utilisation of foreign exchange reserves to arrest the slide of rupee caused by temporary fluctuation in capital flows.
‘If the assessment is that depreciation in rupee is being caused by temporary fluctuation of capital flows, reserves must be used in order to see that impact is not felt on rupee,’ Rangarajan said while addressing a PHD Chamber event here.
The Indian rupee has lost about 8 per cent since the beginning of March. It was trading around Rs 53.59 against dollar in early trade on Monday.
Pointing out that the foreign exchange reserves were not dwindling at a fast rate, Rangarajan said, ‘one step should be to use the forex reserves in order to be able to prevent the rupee from falling sharply’.
The country’s foreign exchange reserves stood at around $290 billion. To check the sliding rupee the Reserve Bank had last week asked exporters to convert half of their foreign exchange reserves into rupee to make available dollars in the market.
Rangarajan said the depreciation in the value of rupee was mainly due to a high current account deficit (CAD) which arises when import of goods and services exceeds its export.
The CAD had touched 4 per cent of GDP at the end of December 2011.
‘If the assessment is that depreciation in rupee is being caused by temporary fluctuation of capital flows, reserves must be used in order to see that impact is not felt on rupee,’ Rangarajan said while addressing a PHD Chamber event here.
The Indian rupee has lost about 8 per cent since the beginning of March. It was trading around Rs 53.59 against dollar in early trade on Monday.
Pointing out that the foreign exchange reserves were not dwindling at a fast rate, Rangarajan said, ‘one step should be to use the forex reserves in order to be able to prevent the rupee from falling sharply’.
The country’s foreign exchange reserves stood at around $290 billion. To check the sliding rupee the Reserve Bank had last week asked exporters to convert half of their foreign exchange reserves into rupee to make available dollars in the market.
Rangarajan said the depreciation in the value of rupee was mainly due to a high current account deficit (CAD) which arises when import of goods and services exceeds its export.
The CAD had touched 4 per cent of GDP at the end of December 2011.
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