Finance ministry allays fears of further fall in rupee value

27 January 2014

The finance ministry has sought to assuage investor fears over the fall in the value of the rupee and volatility in stock markets, saying that the country's economic fundamentals are "very strong".

A record high foreign exchange reserves amidst falling current account deficit and a curtailed domestic debt position should ensure a reversal of the declining trend in economic growth, economic affairs secretary Arvind Mayaram said today.

India's economic fundamentals are ''strong'' and the correction carried out by the government should reduce concerns about the rupee currency, he said, adding that there is no cause for concern

"Current Account Deficit (CAD) is below $50 billion. Foreign exchange reserves are (at) all-time high. We have very strong fundamentals...I don't think that there is any cause of worry," Mayaram said.

His comments come after the rupee slipped to 62.75 against the US dollar and the stock markets plunged, with the benchmark BSE Sensex declining over 300 points in early trade.

The rupee fell to as low as 62.9 to the dollar in early trade today, its lowest since 22 November.

Referring to fears of the last week's massive fall in the value of Argentina's currency peso, Mayaram said there was no reason for the Indian currency to be impacted by the peso's fall.

"I do not see any correlation," he added.

The rupee, he said, "will remain range-bound and we should not get overly concerned."

The value of any currency essentially based on the country's economic strengths, he said, adding that there had been considerable improvement in the India's current account position.

India's CAD, which had slipped to all time high of $88.2 billion 3 or 4.8 per cent of the GDP in 2012-13, is expected to fall to levels around $50 billion in the 2013-14 fiscal.

On the Reserve Bank's move to phase out high-value currencies printed before 2005, Mayaram said it is a mere withdrawal of a series of notes which have security flaws and cannot be termed as demonitisation.

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