New Delhi: Finance Ministry Monday said the rupee should ideally be at 58-60 to a dollar based on the intrinsic value of the domestic currency.
"There is something called intrinsic value of rupee. The intrinsic value of rupee comes from its purchasing power. The intrinsic value of rupee in Real Effective Exchange Rate (REER) term could be somewhere between 58-60," he said.
The rupee, which touched an all time high of 68.86 to a dollar last month, is trading around 62.63 to a dollar today.
The REER refers to the rate of currency in relation to the value of currencies of major trading partners.
The RBI and the government have taken a host of steps to arrest the slide in value of domestic currency, including restrictions on import of gold, check on outward remittances by individuals and overseas investments by companies.
Mayaram further said the demand for bulk diesel is coming down and it would help the government save about USD one billion this fiscal.
In order to rationalise fuel prices and bring down under recoveries of oil marketing companies, 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.
Referring to the impact of tapering of monetary stimulus by the US Federal Reserve, Mayaram said the government has enough ammunitions in its hand to deal with the situation.
"I do believe when tapering happens then there will be outflow of capital but the fact also remains that we have enough ammunitions in our hand... And therefore there is no room to be fearful of rupee taking a tanking," he said.
The forex reserves of the country stands at USD 270 billion, he said, adding if the current trend continues there would be about USD 40 billion additional inflow of capital this fiscal year.
The US Federal Reserve last week surprised the markets by saying it will continue with its monthly USD 85 billion bond buying programme and wait for more evidence of growth recovery before thinking of unwinding the stimulus.
Expectations that the stimulus programme would 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) this current fiscal is expected to be around USD 36 billion.
In the first quarter, the net FDI flows into the country was at USD 9 billion, which is 70 percent higher than FDI inflow in the first quarter of last fiscal.
On growth, Mayaram said, "We are not satisfied with 5 percent growth rate. India's potential rate of growth is 8 percent. In the next two years, India will again start growing at 8 percent."
Economic growth in India in the April-June quarter fell to a four year low of 4.4 percent. In 2012-13, economy grew at a decade's low level of 5 percent.
First Published: Monday, September 23, 2013, 10:34