Chief Economic Advisor says rupee does not need defending

14 Sep 2022 , 02:37 PM

Chief Economic Adviser V Anantha Nageswaran has stated that the Indian government is not “defending” the rupee since it can care for itself.

“I don’t believe India is protecting the rupee. India only ensures that the currency is moving gently and gradually in the direction that the market forces and economic fundamentals are directing it “Speaking at the 15th Mindmine Summit on September 13, the government’s chief economist made the statement.

“I don’t believe the fundamentals in India are such that we need to protect the rupee. The rupee can support itself “he said. The rupee’s exchange rate is still under pressure to fall, and the Reserve Bank of India (RBI) is using its foreign exchange reserves to dampen volatility. Nageswaran made these remarks at the same time.

The RBI has made it clear that it doesn’t have a specific exchange rate goal and simply intervenes in the foreign currency market to reduce volatility. The RBI’s foreign exchange reserves, however, were decreased to $553 billion as of September 2 according to the most recent statistics because of the recent FX market volatility. The reserves are at their lowest point since October 9, 2020, and they are about $100 billion below their all-time peak, which was set in the second part of 2021.

Speaking on growth, Nageswaran noted that although foreign agencies estimated India’s trend growth rate at 6%, he was much more upbeat and believed there was still room for at least another 100 basis points of growth because India had “paid its dues” during the preceding ten years.

“Both the banking industry and the business sector were balancing their books (in the last decade). The effort to fix it is finished. As a result, both the banking system and the business sector are ready to lend and make investments. The plague and the war have just delayed the temporary uncertainty. The investment spending that we saw between 2006 and 2012 is going to return, “said Nageswaran.

“The growth rate that is most readily possible, in my opinion, is 6 %. I am increasing by 0.5 % due to the CAPEX boom. Our developed digital public infrastructure will provide an additional %. The effects it had on formalization, access to finance, and the subsequent good influence on economic growth are not yet fully recognized. And if the world cycle happens to be in our favor in some years, then export growth will be the cherry on top, bringing you up to 7.5-8 %, “he added.

According to the RBI’s prediction, India’s GDP would increase by 7.2% in FY23. The majority of experts predict a considerable decline in growth beginning the next year as a result of the tightening of domestic monetary policy and predictions of a recession in advanced countries.

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