New Delhi: As the effects of the global financial turmoil hit Indian shores, the rupee has been at the receiving end. The demand for dollars by foreign institutional investors and Indian importers has caused the rupee to depreciate sharply. But the minister for commerce and industry Kamal Nath said that the government would not intervene in fixing the level of the rupee and let it find its own level unless something extraordinary was to happen.
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Industry estimates, however, say the Reserve Bank of India has been intervening in the markets and has sold $5 billion in October alone. With the support coming in, the rupee closed higher, ending a five-day falling streak and recovering from a record low of 49.26 per dollar touched on 10 Oct. The rupee rose 0.4% to 48.26 per dollar at close on Monday.
Meanwhile, the commerce minister expressed confidence that exports would continue to grow by 30% even this month. He said that investments would be hit but the government is confident of meeting its FDI target. “We hope to achieve FDI inflows in excess of $35 billion this year, ” he said. The increase in FDI will further ease the flow of dollars into the country.
The government along with the Reserve Bank of India and the Securities & Exchange Board of India are working on a coordinated action plan to infuse more liquidity into the system. Finance minister P Chidambaram said that he was confident that the Indian economy could weather the global financial crisis and emerge stronger. On the matter of infusing liquidity he said, “RBI is ready to take further steps and infuse more liquidity if necessary.”