India’s finance minister said yesterday that intense selling pressure on the rupee was exaggerated and that the currency market “panic” was unnecessary.
“The panic that has gripped the currency market is unwarranted,” P Chidambaram (pictured) told a press conference.
“It is almost universally accepted that the rupee is undervalued and has overshot the reasonable and appropriate level,” he said, describing the volatility in the currency market as “unacceptable”.
Chidambaram said there was no plan to resort to capital controls and that reviving growth, which has slumped to a decade low of 5% in the year to March, would remain the focus of government.
“We are exploring structural measures to reduce the current account deficit and improve foreign capital inflows,” he said, adding that the deficit would be contained at $70bn this fiscal year.
The RBI’s annual report for 2012-13, released yesterday, said India’s foreign exchange reserve, “although lower than in the pre-crisis period, is adequate to finance about seven months of imports”.
RBI governor Duvvuri Subbarao later said this was enough to manage the current situation.
Dealers have said they fear the rupee could weaken further — with Deutsche Bank analysts forecasting on Wednesday that the it could fall to 70 to the dollar.
