The rupee has reached a level where any further depreciation will simply reflect speculative pressure or panic. The government has the situation under close watch and is trying to counter any further fall, Deputy Chairman of the Planning Commission Montek Singh Ahluwalia has said.
Talking to the media at the Jawaharlal Nehru Tropical Botanic Garden and Research Institute at Palode, he said the rupee depreciation would put some pressure on the inflation rate that had been coming down.
But a good monsoon, he added, would hopefully ease pressure on agricultural production.
Mr. Ahluwalia said the depreciation that occurred should not be viewed as something that had happened in India alone. “This is a period where globally, currency markets have been volatile; virtually all emerging market countries have experienced depreciation. India has also been weakened. We do have a current account deficit that is larger than it should be; in that sense, we are a little bit more vulnerable”.
Mr. Ahluwalia, however, said some of the corrections that had occurred in the rupee were also helping others. “The depreciating rupee is good for exporters, it is going to help Indian producers compete with imports; otherwise they used to feel that imports are coming in too much. To some extent, remittances are coming in, there will be an incentive, particularly once the rupee is seen to have stabilised”.
Pointing out that India was going through a slow growth period, he said there was no evidence yet that the turnaround had started
