New Delhi: Finance Minister P Chidambaram on Thursday cautioned against "excessive and unwarranted pessimism" over the rupee's continuing slide and sought to assure investors that while the Indian currency had dropped "more than reasonable expectation", the government was taking steps to deal with the challenge.
"The rupee is undervalued and overshooting appropriate levels. We are not targeting any level for the rupee; we want a stable currency," said Chidambaram at a press conference, on a day the currency breached the 65-mark against the dollar.
He said the recent steps taken by the Reserve Bank of India (RBI) to reduce volatility in the forex market and quell speculation in the rupee would be reversed once stability returns.
Chidambaram, who earlier in the day held a three-hour long discussions with RBI Governor D Subbarao and his successor Raghuram Rajan, said: "There is no cause for panic that seems to have gripped the currency market and that is feeding into other markets. We are confident that stability will return to these markets and we can get on with the task of promoting investment and growth."
Subbarao, in a separate media briefing, said that India has adequate forex reserves to meet the current situation and the central bank will take appropriate measures to curb the rupee's volatility.
Chidambaram also said there was no move to introduce any capital control measures to check the Current Account Deficit (CAD). "There was -- and is -- no intention to introduce any type of capital control, including controls on repatriations. It is not the policy of the government or the RBI to resort to capital control or reverse the direction of capital account of liberalisation. The measures that were taken last week will be revisited as stability returns," he said.
The Finance Minister said that while India is facing several economic challenges, we were "better placed than many others". "The Indian economy is challenged by global and local factors. Growth will pick up due to acceleration in the pace of planned expenditure," he said.
Chidambaram reaffirmed the government's commitment to contain fiscal deficit at 4.8 per cent of the GDP and CAD at $70 billion in 2013-14.
He, however, said that growth would "remain flat in the first quarter of the current fiscal".