Reiterating what his Chief Economic Advisor Raghuram G. Rajan stated on the rupee slide a day ago, Finance Minister P. Chidambaram sought to reassure investors saying that there was no need for panic as the Reserve Bank of India would take action whenever necessary.
To a query on the free fall of the rupee in an extremely volatile exchange market at a press briefing on cabinet decisions, Mr. Chidambaram said: “We are watching the situation. The RBI will take whatever action it has to take. We have good economic advisors. We will [do] whatever has to be done ... My request is you should not react in panic, it’s happening around the world.”
Expressing unhappiness over the market gyrations, the Finance Minister pointed out that similar volatile currency movements were being witnessed in other parts of 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 U.S. Federal Reserve,” he said.
Mr. Chidambaram viewed that Fed Chairman Ben Bernanke’s statement indicating a likely scale-back of its monetary stimulus programme later this year if the U.S. economy improved as per projections was being misinterpreted yet again, as it was a month ago.
“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…It is my view that just as Mr. Bernanke’s statement was misunderstood a month ago, yesterday’s statement [too was] being misunderstood,” he said.
Mr. Chidambaram also informed that the Cabinet was likely to take up the proposal of hiking FDI caps in various sectors next month. “FDI cap review may come up before Cabinet in third week of July,” he said.
In its bid to promote India as an investment destination, the Finance Ministry earlier this week proposed sweeping changes in the FDI regime, favouring higher sectoral caps in almost all sectors, including defence, multi-brand retail and telecom.
