Govt picks true value of rupee - Calcutta Telegraph

Economic affairs secretary Arvind Mayaram with Canadian High Commissioner Stewart Beck at a Ficci event in New Delhi on Monday. Picture by Yasir Iqbal New Delhi, Sept. 23: The finance ministry today said the rupee should ideally be between 58 and 60 against the dollar based on the intrinsic value of the domestic currency. "There is something called the intrinsic value of rupee. The intrinsic value of the rupee comes from its purchasing power. The intrinsic value of the rupee in real effective exchange rate (REER) term could be somewhere between 58 and 60," economic affairs secretary Arvind Mayaram said at an event here. The rupee, which had touched an all-time low of 68.86 to the dollar last month, closed at 62.60 to the dollar today. REER refers to the rate of currency in relation to the value of the currencies of the major trading partners. The RBI and the government have taken a host of steps to arrest the slide in the domestic currency, including restrictions on the import of gold, check on outward remittances by individuals and overseas investments by companies. Mayaram further said the demand for bulk diesel was coming down and it would help the government save about $1 billion this fiscal. To rationalise fuel prices and bring down the under-recoveries of oil marketing companies (OMCs), the government had earlier this year allowed OMCs to charge market rates from bulk users of diesel. Retail customers, however, continue to get diesel at subsidised rates. Armed for Fed move Referring to the impact of tapering of the monetary stimulus by the US Federal Reserve, Mayaram said the government had enough ammunitions in its hand to deal with the situation. "I do believe when tapering happens there will be an outflow of capital but the fact also remains that we have enough ammunitions in our hand. Therefore, there is no room to be fearful of rupee taking a tanking," he said. The forex reserves of the country stands at $270 billion, he said, adding if the current trend continues there will be about $40-billion additional inflow of capital this fiscal year. The US Federal Reserve last week surprised the markets by saying it would continue with its monthly $85-billion bond buying programme and wait for more evidence of recovery before thinking of unwinding the stimulus. Expectations that the stimulus programme will be tapered had led to fears of capital outflows, causing the rupee to depreciate against the dollar and stocks to fall. Mayaram said foreign direct investment (FDI) in the current fiscal was expected to be around $36 billion. In the first quarter, net FDI flow into the country was at $9 billion, which is 70 per cent higher than the first quarter of the last fiscal. On growth, Mayaram said, "We are not satisfied with a 5 per cent growth rate. India's potential rate of growth is 8 per cent. In the next two years, India will again start growing at 8 per cent." Growth in the April-June quarter fell to a four-year low of 4.4 per cent. In 2012-13, economy grew at a decade's low of 5 per cent. Borrowing plan The government will borrow Rs 2.35 lakh crore from the market in the second half of the current fiscal, Mayaram said. During the first half of the fiscal year, the market borrowing through dated securities will be Rs 3.44 lakh crore. The Union Budget 2013-14 had estimated the gross and net market borrowings through dated securities at Rs 5.79 lakh crore and Rs 4.84 lakh crore, respectively. The government borrows funds from the market to finance the fiscal deficit, which is expected to be 4.8 per cent of the gross domestic product in the current financial year. The borrowing programme will to be completed by the first week of February. The average weekly borrowing will be Rs 15,000 crore. The net borrowing is estimated at Rs 1.98 lakh crore. Mayaram also announced that the ways and means advances limit for meeting unexpected expenditure has been fixed at Rs 20,000 crore. via Business - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNHe8yARxpNn47L09tRyDyaQ1oXprA&url=http://www.telegraphindia.com/1130924/jsp/business/story_17384535.jsp

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