The Finance Ministry on Wednesday described the sharp fall in the value of the rupee as a reflection of “irrational sentiment” and said there is no need for panic.
“This is an irrational sentiment. It will correct itself. It is important to stay on the course. There is no need to panic,” Economic Affairs Secretary Arvind Mayaram told reporters in New Delhi.
He was responding to a query on the value of the rupee, which fell to a new low of 68.75 against the dollar in intra-day trade today. The rupee has declined over 20 per cent since April on concerns about the country’s widening current account deficit, slowing economic growth and capital outflows.
The rupee dropped today as oil prices rose in Asian trade on concerns over possible US military action against Syria.
Seeking to assure investors, Mr. Mayaram said the current account deficit (CAD) in 2013-14 will be much lower than expected.
“CAD will be much lower than expected. We have already seen some moderation in CAD,” he said.
CAD, which is the difference between the inflow and outflow of foreign exchange, hit a record high of $88.2 billion in 2012-13. The government expects to bring it down to $70 billion in the current fiscal.
Mr. Mayaram further said the government does not plan to ban derivatives trading in the currency market, a move that experts feel could help in curbing speculation.
Yesterday, Finance Minister P Chidambaram had said the rupee is undervalued and came out with a 10-point action plan to revive the economy, which included promoting exports, encouraging manufacturing, and reducing the fiscal deficit and CAD.