Kaushik Basu, former chief economic adviser of India and former chief economist of the World Bank. (Photographer: Lisi Niesner/Bloomberg)

Kaushik Basu Says Rupee Is Over-Valued, Sees Fair Value At 70-71 Against Dollar

Kaushik Basu, globally renowned economist and former chief economic adviser at Ministry of Finance, said the rupee is over-valued and the fair value of the local currency is 70-71 to a dollar.

The widening current account deficit and higher interest rates have made the rupee the worst among its Asian peers so far this year. Reserve Bank of India has hiked interest rates twice by 50 basis points to 6.5 percent since June, making the rupee bleed more.

The rupee hit a fresh two-week low of 68.88 to the dollar on Monday, plunging 28 paise on rising demand for the U.S. currency from importers and corporates. The rupee had weakened on selling by foreign investors, fiscal and trade deficit concerns .

“Our exchange rate has tended to appreciate in the past couple of years as we are inflating faster than the industrialised countries. Barring the correction that has taken place in the past few months, the rupee has been appreciating. The right level for the rupee is 70-71 to the dollar,” Basu said speaking at an event organised by the JSW Foundation and the Literature Live, a Tata-group initiative.

Basu also raised concerns regarding the jobs market saying poor employment growth is a matter of concern. "Jobs data is very poor in our country. A part of it is legitimate as so much of work is very different work from what we get in the West," he said.

"Though our methods of data collection on jobs are taken from the West, those categories don't fit here. We are very good at collecting consumption data or price data, but not jobs data," he said.

Basu also flagged concerns over rising intolerance in the name of religion and other sectarian causes in India. He also commented on anti-globalisation sentiment.

Basu also said despite many ills, globalisation is an irreversible reality but to sustain it in the long term, corporations which have been benefiting from it should be ready to part with a portion of their higher profit towards affected employees and even local populations.