New Delhi: Attributing the rupee's decline to dollar surge in international markets, Planning Commission Deputy Chairman Montek Singh Ahluwalia on Wednesday said the government has been taking steps to deal with the economic situation and hoped that forex market will stabilise.
"We have taken a number of steps, macroeconomic steps, fiscal deficit reduction step, steps to improve domestic investment confidence. I think as these steps begin to buy, some of them are already buy say, we should see a more stable condition.
"But you know we are not targeting any given level of rupee...Currency move up and down and I think market know how to deal with that," Ahluwalia told reporters here.
The rupee had touched an all-time intra-day low of 58.98 yesterday on strong dollar demand before closing at 58.39. However, the rupee recovered today against the US dollar on RBI's steps yesterday to check free-fall in rupee.
Earlier today in an interview to a television channel, Ahluwalia said that the Reserve Bank did intervene in the forex market yesterday to arrest the unnecessarily fall of the rupee.
"They (RBI) did intervene yesterday which suggests that they felt that market pressures were pushing the currency to an unnecessarily low point and that did lead to some reaction. I don't think one can say anything more than that when you are dealing with an exchange rate that is market determined," he told the channel.
He said rupee is falling in tandem with all emerging market economies because of their high current account deficit.
"I think if you look at all emerging markets, every emerging market country has a current account deficit...But you know currency instability should not be looked as one currency depreciation. Dollar is on the rise against all the currencies, you can't expect the rupee to necessarily remain the same," Ahluwalia told reporters here.
He said the finance ministry officials have also said a lot about decline in rupee which he agrees as there is lot of volatility globally in the currency value.
"I generally agree what they (Finance Ministry officials) have said which is that there is a lot of volatility globally in currency value now and that's partially because of the expectations perhaps the financial stimulus measure in the United States will get withdrawn later," he added.
Ahluwalia further said the government realises the need to correct the higher current account deficit (CAD) and several steps have been taken already. India's CAD had touched an all time high to 6.7 per cent of GDP in the fiscal ended March, 2013.
On asked about the impact of depreciating rupee on inflation, Ahluwalia said going ahead it will depend on maintaining the fiscal deficit as well as hopes of a good monsoon.
"For any depreciation (in rupee), the import price will be higher than otherwise it would be...Looking at inflation ahead is critically going to depend on whether we are able to maintain the fiscal deficit, which I think we will be, whether the domestic supply situation is going to improve, which I think will improve."
Last week, Finance Minister P Chidambaram had said that the government hopes to improve upon the fiscal deficit target of 4.8 percent in the current fiscal. India's fiscal deficit remained at 4.9 percent of the GDP in 2012-13.
Further, talking to the channel he said India has potential to get back to about 6 percent growth rate from 5 percent last fiscal.
"Ideally, we should go even above 6 per cent but it is very difficult to predict what will happen. Once investors see that the Indian economy is back on a higher growth path then financing the deficit through normal flows will not be that difficult," he said.
He also told the channel that by the end of 12th Plan (2012-17), India will be able to reduce the CAD to around 2.5 percent of the GDP which will be a comfortable level.