New Delhi, Aug. 22: Finance minister P. Chidambaram tried to soothe the volatile markets today after the rupee tumbled to a new all-time low of 65.66 against the dollar, asserting that there was no reason for excessive pessimism.
“We believe that the rupee is undervalued and has overshot what is generally believed to be a reasonable and appropriate level,” Chidambaram said, echoing what Deutsche Bank economists had said yesterday.
Emerging from a three-hour huddle with RBI governor D. Subbarao and his designated successor, Raghuram Rajan, Chidambaram reassured foreign investors that neither the government nor the central bank had “any intention to introduce any type of capital control, including controls on repatriation”.
He said the recent measures — which slashed annual dollar remittances by resident Indians — would be revisited as soon as stability returned to the markets.
The rupee today closed at 64.55, recovering slightly at the end of another day of skittish trading. Chidambaram said the rupee had been hammered by speculators who were ignoring official statistics and “cooking up their own numbers”.
He said the government had been able to cap the fiscal deficit at 4.9 per cent in 2012-13 and would pare it further to 4.8 per cent of the GDP this year. The current account deficit — which had ballooned to 4.8 per cent of the GDP last year — will be capped at 3.7 per cent, he said.
The rupee has been battered because of fears that the US Federal Reserve would start tapering its $85-billion-a-month bond-buying programme that has funnelled cheap money into emerging markets like India.
RBI governor-designate Rajan is believed to have advised that the central bank defer its mid-quarter monetary policy meeting — slated for September 18 — by a few days to await the outcome of the US Federal Reserve’s policy-making Federal Open Market Committee’s two-day meeting that ends the same day.