Last Friday, the government announced five measures to arrest the sharp slide in rupee and also the deficit in the current account. These include relaxations in investment limits for foreign portfolio investors in the corporate debt market to attract dollars and exemption from withholding tax to companies raising funds through rupee-denominated bonds abroad. The government also indicated curbs on non-essential imports and said measures to boost exports will follow, both aimed at containing the current account deficit. The next day, Finance Minister Arun Jaitley provided assurance the government will be able to meet its revenue collection target as well as the fiscal deficit target set in the Budget for 2018-19 at 3.3 per cent of the GDP.
A misconceived notion in some parts of the government is that speculators are playing truant and short-selling the rupee. The so-called speculators are mostly Indian exporters and importers taking positions on the rupee based on the clues they receive from the market. While senior finance ministry officials have been making statements — irresponsible at times — on the value of rupee, the RBI has desisted from giving any firm signal to the market about where it would draw a line. This suggests lack of coordination between the government and the regulators despite existing forums such as the Financial Stability and Development Council.
