Chief Economic Advisor Kaushik Basu on Thursday expressed concern over the volatility of the rupee and pitched for curbing speculation in the forex market while dismissing the tax on Vodafone as a ‘one-off thing' with no impact on foreign investment.
Speaking at the ESACP survey launch function here, Dr. Basu pointed out that while the rupee volatility has been a concern, the Reserve Bank of India intervenes to stabilise the Indian currency only when the fluctuations are sudden and extreme.
“Rupee volatility is a concern. We are watching it … The RBI is hands-off if there is big fluctuation. Some are natural processes ... but there are also speculative moves that players make on this and those have to be watched very, very carefully by the RBI,” Dr. Basu said.
Dr. Basu noted that owing to higher inflation, the rupee has been depreciating against the dollar and owing to lower inflation in the U.S., the Indian currency has been value against the greenback over the past decade. “Certain amount of depreciation of the nominal exchange rate is purely a reflection of the differences in the inflation that have occurred over the last few years,” he said.