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Rupee will be market determined- Chidambaram
Sops may be provided for exporters
The Indian Government is concerned over he rapid rise in the rupee value against the U.S. dollar but will not intervene other than providing some succour to exporters, Finance Minister P. Chidambaram said here.
“It (the rise of the rupee) has some consequences, particularly for exportes,” he told PTI on the over 11 percent rise in the rupee against the greenback this year. If the package given in July was not sufficient, the Government could think of more steps to help them tide over the situation, he added.
Mr. Chidambaram, who also addressed the Peterson Institute for International Economics, said unless the U.S. Government took some steps, India could not do any thing in this regard.
“Our exchange rate has a symbiotic relationship with the exchange rate of the US…
The rupee is stable against the Euro and many other currencies. It is only against the dollar the rupee has appreciated by nearly ten to ten and a half percent in the last eight to nine months,” he said.
In this context, Mr. Chidambaram made it clear that neither the Government nor the Reserve Bank of India had a view on the exchange rate, which, he said, was market determined and would remain so. In a bid to calm the market, he said, “if there is any volatility or disorderly movement, I suppose the central bank will intervene using whatever instrument it has. The Central Gov3ernment does nothing on that behalf.”
Mr. Chidambaram said the Government was concerned over rupee appreciation. The policy was to allow two-way movement of the exchange rate, but the movement should be ‘orderly,’ he said.
The rupee touched 39.63 to a dollar on Wednesday, its highest level since April 1998. The RBI has refrained from intervening as this makes imports cheaper.
“Exporters have been taken by surprise. We offered them a package a couple of months ago but if that is not adequate then we would have to think of ways and means by which they can be given a helping hand to tide over the rest of the year,” Mr.Chidambaram said.
The Government had given a Rs. 1,400 crore package to exporters in July and had earlier indiacated that the export target of $160 billion for 2007-08 could be scaled down if the rupee continued to rise.
“But in the medium to the long run, exporters would have to learn to hedge to reprice their export contracts in tune with exchange rates,” the Finance Minister said.
The rupee’s real and nominal effective excahange levels were “way beyond comfort levels” at the moment, but “that is something we have to learn to live with,” he said.
“Unless the U.S. Government does something about the dollar, there is nothing much I can do about the rupee, as far as the rupee-dollar parity is concerned,” Mr. Chidambaram said.