RBI’s Gokarn vows steps to curb rupee slide

05 Dec 2011

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The rupee went down again today after a slight upturn against the dollar last week. Reserve Bank of India deputy governmor Subir Gokarn had signalled on Saturday that the central bank is prepared to act against excessive declines in the currency.

The fall in the rupee, Asia's worst performing currency this year, threatens to exacerbate the fastest inflation among the so-called BRICS nations.

At 9:30 am today, the partially convertible rupee was at 51.25/26 per dollar from Friday's close of 51.20/21; though Gokarn's comments helped stem the slide.

The recent sharp depreciation isn't a sign of ''helplessness in dealing with the kind of global turbulence we are seeing,'' Gokarn, who oversees RBI's monetary policy, said in Mumbai. ''We do have the instruments to do this in the form of strategic capital controls, which can be used to enhance the supply of foreign exchange.''

According to report in The Economic Times today, the authorities will discuss imposing restrictions on overseas investments by local companies and curbing pre-payments of foreign loans to conserve dollars if the recent trend of a weakening rupee continues.

The currency has fallen 12.9 per cent this year as investors sold emerging-market assets on concern that Europe's debt crisis will lead to a global recession.

India's economy expanded last quarter at the slowest pace since 2009 after the central bank raised interest rates 13 times this fiscal to tame inflation.

Asian currencies from Indonesia to India have fallen this year as policymakers grapple with Europe's protracted sovereign-debt crisis, which has hurt demand for the region's exports and prompted nations from Australia to Thailand to lower borrowing costs.

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