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Rupee weakness is a temporary phenomenon and will recover soon: Raghuram Rajan

10 Jun 2013 Evaluate

Concerned over the fall in rupee value to lifetime low of over 57.50 against dollar, the finance ministry said that there is an unwarranted panic in the market and will settle down in some time. Raghuram Rajan, chief economic adviser at the finance ministry has said the weakness in rupee could be a temporary phenomenon and the government will continue to take measures to curb the current account deficit and does not want the rupee to be volatile.

Furthermore, Economic Affairs Secretary Arvind Mayaram said that presently, dollar is appreciating against all the currencies across the world and the rupee has not weakened as much as some of its peers. The central bank also stated that it will do everything to turn down the volatility, but will not disclose its strategy. The RBI has forex reserves of over USD 290 billion to deal with the situation on the external sector.

The rupee is depreciating mainly due to the high CAD, which widened due to rising gold import and high crude oil prices. Further, persistent dollar demand from importers and banks also added to the fall in rupee value. In May, India’s gold imports touched 162 tonnes, while in April, it was around 100-120 tonnes, higher than the average monthly import level of 70-80 tonnes. While, the CAD widened to a record high of 6.7% in the third quarter of FY13.

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