Finance minister P Chidambaram said on Friday that there was no need for panic over the weakness in the rupee and assured that the government and the Reserve Bank of India were monitoring the situation closely.
The sharp decline in the rupee against the US dollar on Thursday had raised fresh concerns about the health of the economy. Chief economic adviser Raghuram Rajan moved to calm jittery financial markets.
“We are watching the situation… RBI will take whatever action it has to take. We have good economic advisers. We will (do) whatever has to be done … My request is you should not react in panic, its happening around the world,” Chidambaram told reporters when asked about the rupee’s decline. The Indian currency hit an all time low of 59.98 but suspected RBI intervention stemmed the fall.
The possible winding down of the stimulus by the US Federal Reserve led to a panic sell-off across the globe on Thursday. The finance minister said India cannot remain isolated from the developments in other economies around the world. “We are not happy, we are unhappy (over) what’s happening. But that’s an impact that every currency in the world (is facing) because of certain announcements made by the US Federal Reserve.”
Chidambaram said the funds being pulled out of emerging markets will need to find an investment destination. “Why should there be such a reaction in the world market. Obviously that money which is being pulled out from all emerging markets will ultimately have to find a place,” The minister said the financial market misunderstood the statement US Federal’s Ben Bernanke.
Source: The Times of India