MoF unfazed by rupee fall

Commenting on the crossing of the Rs 40-level, Montek Singh Ahluwalia, finance secretary remarked that he was not alarmed. "We have noted that the rupee opened above Rs 40 but that is a very small change from Tuesday’s close of Rs 39.89," Ahluwalia said.

Officials of the ministry in private conversations have said all through the slide of the rupee that the realistic value of the rupee is at sub-40 levels. With their view vindicated today, the officials harped on their statements made a few weeks ago and underscored that given the larger framework of the South-East Asian crisis the rupee had no choice but to be on a downward course. Here the oft-repeated argument of maintaining export competiveness with the countries in the neighbourhood was reiterated.

The ministry also underscored that since the dollar has strengthened against major currencies, the rupee cannot stay in isolation and must reflect the changed parity levels.

The ministry also indicated that the Reserve Bank of India has chosen a wise policy of not over-reacting to the drop of the rupee. Interventions by the RBI which amounts to selling dollars to banks in an over charged market condition only goes towards satiating the speculative urges of the market and is at best avoided. If intervention happens on a steady basis the purpose of intervention is defeated as it can be easily anticipated by the market, ministry officials argue.