The Indian government, the Reserve Bank of India and Sebi will take "warranted" action to stall a sharp fall in the rupee, the Finance Ministry's chief economic adviser Raghuram Rajan said on Tuesday.
Addressing a press conference, Mr. Rajan said the factors affecting the rupee are reversing, and the currency will be back on track in a few days.
Here are the highlights:
- Exchange rate has depreciated. This is in par with Korea, Brazil and Turkey.
- It is at par with other emerging markets
- Trade flows is another reason. Every year trade deficit tends to be larger, gold purchases become larger
- I am not putting additional restrictive measures on gold
- Real effective exchange rate has become undervalued
- Some factors affecting rupee weakness reversing
- Government, RBI watching market situation
- The large trade deficit in May was on account of seasonality
- We will explore all ways to safely finance the current account deficit
- We will see pick-ups in exports/imports
- Current account deficits will narrow in next few months
- Net equity flows have remained positive despite turmoil in currency markets
- As exchange rate stabilizes, we will see resumption of equity in flows as realization dawns the Indian assets are quite cheap
- Fundamentals in India are progressing
- Indian assets have become cheaper
- No reason for them to get cheaper still
- Sebi, RBI, government are keenly following what is happening and everybody will act when the time comes
- Government's intent is to create conditions to narrow current account deficit as well as stable financing of deficit
- We will have to live up with short term volatility, but this will dissipate eventually
- We are trying to reduce barriers to get into India
- We will get some hot money, but net-net we may get financing that remains in India
- Since April 25, debt flows have been positive and equity flows have been highly positive
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