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Cash course
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Calcutta, July 7: Kaushik Basu, chief economic adviser to the Union finance ministry, expects the rupee path to be sticky and sees little chances of the currency rising above the 50-mark in the coming months.
“Rupee volatility (at 55-56 to the dollar) is not desirable. But, you have to be realistic. Gone are the days of rupee being at 47-48 mark,” Basu said today at a programme organised by the Bharat Chamber of Commerce.
“The next few months are difficult. We expect it to remain around 50 and we have to live with that,” he added.
Although the rupee was fluctuating “too much”, he said it was not possible to sell dollars to prevent a sharper fall as there was a “tendency of panic” if foreign exchange reserves shrink.
Basu also expressed concern over high current account deficit. He pointed out that the prevailing deficit of 4.2 per cent of the country’s gross domestic product (GDP) was the highest India ever had.
However, he said the fluctuation in the currency presented an opportunity for exports to fetch better return and that, in turn, would lower the current account deficit. He urged exporters to take advantage of this situation.
“Service sector export is doing very well, but manufacturing goods export was not any way near to its potential...increasing export is essential in managing the current account deficit,” he said.
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