Govt targets a 'level' for rupee: Chidambaram
Says banks need not increase their lending rates 'I am confident that rupee will stabilise. We are targeting a level for the rupee. But there are...
Says banks need not increase their lending rates "I am confident that rupee will stabilise. We are targeting a level for the rupee. But there are times when each one of us know intuitively that the rupee may have slid more than it should. Therefore, we want the rupee to stabilise. We want volatility to be contained," P Chidambaram Jaipur/New Delhi (PTI): Dismissing fears that RBI decisions Monday night could lead to tightening of interest rates, Finance Minister P Chidambaram on Tuesday said government was targeting a "level" for the fluctuating rupee. He does not expect banks to increase their lending rates in the aftermath of the RBI's decisions which he said were taken to arrest excessive speculation and volatility in the forex market. Chidambaram also said that steps taken and those to be taken will moderate inflation and contain the high Current Account Deficit (CAD). "These measures (RBI decisions last night) are intended to quell excessive speculative activity in the foreign exchange market and to stabilise the rupee. I believe that these measures are for short term and certainly should not be interpreted as a prelude or precursor to some kind of tightening of policy rates. "I am confident that rupee will stabilise. We are targeting a level for the rupee. But there are times when each one of us know intuitively that the rupee may have slid more than it should. Therefore, we want the rupee to stabilise. We want volatility to be contained," he said while addressing venture capitalists and private equity funds in Delhi. Earlier, he told a press conference in Jaipur: "These measures should not be read as prelude to any policy rate changes. This has nothing to do with upcoming policy review of RBI...I don't expect banks to increase interest rates as a result of yesterday's measures". RBI last night announced a slew of measures like raising cost of borrowing by banks by 2 per cent to 10.25 per cent and announcing sale of bonds worth Rs 12,000 crore through open market operations to suck liquidity to check rupee slid, which had earlier in the month touched a all low of 61.21 to a dollar. The government which has been saying that value of rupee will be decided by the market for the first time today spoke of targeting a level for the currency. In the morning press conference he said the value of rupee, he said, will depend upon "how much foreign exchange we earn and how much foreign exchange we spend". Chidambaram said inflation will come down to tolerable levels if crude prices do not rise again and assured investors that current account deficit (CAD) would be financed without dipping into forex reserves. He said the deficit was financed last fiscal without dipping into foreign exchange reserves, and this year it would be contained below the 2012-13 level of 4.8 per cent of the GDP. "Reforms is a work in progress. Every day we address issues and every day we try to make things better for business to be done in India. "Going forward we will be able to ramp up the growth rate to the target of 6 per cent and above in the current year, 7 per cent and above in the next year and a year after to reach our potential growth rate of 8 per cent above," he added. Rules out ban on gold imports Jaipur (Agencies): Finance Minister P Chidambaram has ruled out a complete ban on gold imports while again appealing to the people to moderate their demand for the precious metal. Attributing the high current account deficit (CAD) to mainly gold imports, the finance minister said the inward shipments of the precious metal resulted in outgo of $50 billion. "We cannot completely ban import of gold. There is a long time attachment to gold in this country. I am requesting... Can we for, sometime, moderate the demand for gold? Can we reduce our appetite for gold? If you are buying, say 20 grams, can you buy 10 grams?" he said addressing a press conference here. Gold imports in June are estimated to have fallen to around 31 tonnes, down from 162 tonnes in May and 141 tonnes in April.