RBI Intervention May Not Help Stabilise Rupee, Says Economic Affairs Secretary
Intervention by the Reserve Bank of India to stabilise the rupee may not help as the currency is weakening due to global factors, Economic Affairs Secretary Subhash Chandra Garg told reporters today.
As the currencies of other economies are also depreciating, the RBI’s intervention, in the form of selling U.S. dollars, will not help much at this stage, Garg said.
The government is yet to assess how long the volatility in the rupee will last, he said, when questioned about its impact on the Indian economy. “Even if the rupee falls to 80 against the dollar, it will not be a concern provided other currencies too depreciate in the same range.”
Garg later clarified in a tweet that the recent slide in the rupee was essentially due to external factors, and that its fall to 80 against the dollar is hypothetical.
The rupee dropped below 70 per dollar mark for the first time today, weighed down by an emerging market currency rout. The currency fell 0.2 percent to 70.08 against the dollar at 10:35 a.m., following a 1.6 percent drop in the previous session—its worst performance since Sept. 2013. The currency is also down almost 9 percent this year, making it Asia’s worst performer.
A weaker rupee can complicate the RBI’s task of keeping inflation in check. The local unit is still better compared with other currencies, Garg said. The fall in the local currency, in percentage terms, is not as high as compared with 2013.