Indian rupee will find its level: FM

Chidambaram said that financing current account deficit is a challenge

July 02, 2013 11:00 IST | India Infoline News Service
Finance Minister P Chidambaram on Monday said the Indian rupee will find its level as steps being taken by the Government to contain the fiscal and current account deficits will improve investor sentiment.

The vulnerable rupee witnessed the sharpest fall of Rs. 60 against the US dollar on 26 June. The faculties attribute the foreign institutional investors, huge government borrowings, current account deficit, rising dollar and lack of policies as key reasons for the depreciation of the rupee.

The Finance Minister further said that there is ‘no good and bad value’ that one could attach to the price of the rupee. He pointed out that high CAD, fiscal deficit and inflation have a depreciating impact on the rupee.

India’s CAD touched a record high of 4.8% of the GDP in fiscal 2012-13 due to high imports, including that of gold. High CAD puts pressure on the value of the rupee.
The country's CAD narrowed to 3.6% of GDP in the first quarter of 2013, down from a record high in the previous quarter.

The deficit for the three months to March was $18.1 billion, compared with a record $32.6 billion or 6.7% of GDP for the previous quarter, the Reserve Bank of India (RBI) said.

Chidambaram said that financing CAD year after year is a challenge and the only way to deal with the problem is by increasing exports.

Chidambaram said the Government had financed the CAD through foreign inflows last year and also added about $3.8 billion to the foreign exchange reserves.

The Government has been taking steps to encourage overseas investment and is in the process of relaxing FDI caps in various sectors.

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