The Reserve Bank of India cannot arrest the rupee's decline if it is caused by weak fundamentals or global factors but can only take more calibrated steps in the forex market in such a scenario, top official said on Friday.
“If the rupee fall is due to fundamental weakness of the economy, or due to global factors, then the RBI cannot support it,” RBI Deputy Governor K. C. Chakrabarty told reporters on the sidelines of an HR summit of the state-run banks here.
The government must address trade deficit issues if the fall of the rupee was due to weak fundamentals, he added. “If the rupee is depreciating due to real sector issues, financial sector measures will not solve it,” Mr. Chakrabarty said.
The rupee has been losing value against all the major currencies, especially the American dollar, since April and hit an all-time low of 56.52 on Thursday. As a measure to contain dollar demand and help support the rupee, Mr. Chakrabarty also hinted at opening a separate window for oil companies.
Without referring to the forthcoming mid-quarter review of the monetary policy slated for June 18, the RBI Deputy Governor said, “If inflation comes down then interest rate will also come down.”
Keywords: Indian economy