RBI to intervene in forex market to prevent instability: Subbarao
   
Quotes

RBI to intervene in forex market to prevent instability: Subbarao

Last Updated: Thursday, July 18, 2013, 21:58
 
 Comment 0
 
RBI to intervene in forex market to prevent instability: Subbarao
London: Amid efforts being made to stem rupee's fall, RBI Governor D Subbarao has said the currency's exchange rate will largely be market-determined but central bank would intervene to prevent disruptions to macro-economic stability.

"We let our exchange rate be largely market-determined, but intervene in the market to smooth excess volatility and/or to prevent disruptions to macroeconomic stability," he said while speaking at the European Economics and Financial Centre here yesterday.

India, Subbarao said, has been following the 'middle solution' to deal with the exchange rate problems. Middle solution implies giving up on some flexibility to maximise overall macro economic advantage.

He elaborated that in India rupee is only partly convertible. While foreigners enjoy unfettered access to equity markets, access to debt market is limited. Also there are limits on funds which resident corporates and individuals can take out for investment abroad.

The RBI earlier this week had announced a slew of measures like raising cost of borrowing by banks by 2 percent to 10.25 percent and announcing sale of bonds worth Rs 12,000 crore through open market operations to suck liquidity in its bid to check sliding rupee which hit a life time low of 61.21 to a dollar.

Referring to fiscal deficit, Subbarao said it is by far the biggest concern from the central bank's perspective as it adds to aggregate demand and add to inflationary pressure.

"Credible fiscal consolidation is, therefore, a necessary precondition for stabilising inflation and securing non-inflationary growth," he said.

Subbarao stressed "economies will be best served if governments ensure that their central banks are able to conduct monetary policy independently and free of fiscal compulsions".

The government restricted the fiscal deficit to 4.9 percent of GDP in 2012-13 and plans to bring it down to 4.8 percent in the current year.

PTI



First Published: Thursday, July 18, 2013, 21:58


Comments


comments powered by Disqus
Ford Figo Aspire
Ford Figo Aspire
Samsung Galaxy S6 Edge Plus, Note 5
Samsung Galaxy S6 Edge Plus, Note 5
Maruti Suzuki S-Cross
Maruti Suzuki S-Cross
Mahindra New Thar CRDe
Mahindra New Thar CRDe
New Generation Scorpio
New Generation Scorpio

Contact Us : Privacy Policy : Legal Disclaimer
Copyright © Zee Media Corporation Ltd. All rights reserved