Rising rupee poses a problem: Chidambaram

By Arun Kumar

Washington, Sep 26 (IANS) Finance Minister P. Chidambaram says the Indian rupee’s continuous rise against the dollar has brought the country up against the problems of an appreciating currency with a challenge to its exports and tax revenue.

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“The depreciation in the value of the dollar versus the rupee has thrown up unexpected downside risks,” he said in a lecture at the Peterson Institute for International Economics here Tuesday.

“It has challenged our exports and our tax revenue, and we may find ourselves in a situation where we need to provide for the consequences of an appreciating currency,” Chidambaram said, referring to the more than 11 percent gain of the rupee against the dollar this year.

“Our exchange rate policy is that we allow two-way movement of the rate and our only concern is that the movement should be orderly,” he said, noting that the rupee was stable against the euro and other currencies.

“Neither the government nor the central bank takes a view on the exchange rate. This is market determined and will be market determined,” Chidambaram said, but in the case where there was volatility or disorderly movement of the rupee, “I suppose the central bank will intervene.”

He said the level of appreciation of the rupee was “well beyond comfort levels. That is something we have to live with and our exporters will have to learn to live with it”.

Earlier, Chidambaram met US Treasury Secretary Henry Paulson to discuss his upcoming trip to India.

They also talked about the importance of developing Mumbai into an international financial centre and boosting private financing for the country’s infrastructure needs.

They discussed how financial regulators and the US could best assist India in achieving its economic and development goals, the treasury department said.