The finance ministry on Thursday sought to allay fears of a quickly tanking rupee and stressed that the domestic currency is not in shambles,while promising to take measures to curb volatility as well as steps to strengthen the capital markets. We are not short of instruments. We have a range of instruments to call on as and when needed,we will call upon them, said Raghuram Rajan,chief economic adviser to the finance ministry. Rajan said the government,the Reserve Bank of India and market regulator Sebi are closely monitoring the situation. He,however,ruled out any further curbs on gold imports that have been putting pressure on the current account deficit (CAD). We have to be very careful in thinking through options, he said. We should not be overtly pessimistic. We do not like volatility, he said. Promising that the government is taking steps to control the large CAD,Rajan also expressed confidence that the trade deficit,which touched a seven-month high in May at $20.1 billion,would be lower in June. Gold imports are coming off their peaks, he said,while ruling out any knee-jerk reaction to curb gold imports. He said,Curbs or blanket bans are harmful because they hurt the economy. We have to take measured actions rather than knee-jerk reactions. Pointing out that currencies of all emerging markets are depreciating,Rajan said there is noting wrong with the rupee. I believe over time matters will stabilise. We will be alert to developments and take actions as necessary,but we will not let it detract us from the long-term goal of putting economic recovery on firm and solid ground.
