The government is not targeting any level for the rupee and will leave it to the market to decide that, Economic Affairs Secretary Shaktikanta Das said today, attributing its recent surge to the growing strength of the Indian economy. The domestic currency has been Asia’s best performer this year and its rising clout against the US dollar has been aided by a hands-off approach by the RBI.
“The value of the rupee is market determined and so far as the government is concerned, we do not have any fixed value of the rupee. So, the market will decide,” Das, who is here to attend ADB’s annual meeting, told the Indian media here. Stating that the level of the rupee is linked to many factors, he said it is primarily the central bank’s job to monitor the situation and ensure the rupee value is broadly stable and not exposed to any volatility.
He attributed the rupee’s rise to strong Indian economy as reflected by robust GDP growth, low inflation rate, under- control fiscal deficit and uptrend in exports. “Together, all these factors demonstrate the strength of the economy. Now, when an economy is strong, when an economy offers good returns, naturally foreign investors are motivated to invest more into the country and Indian markets are giving a very decent return to investors,” he explained.
The strength of the economy, Das said, is leading to inflow of investments, which in turn strengthened the rupee. “I think somewhere there is a linkage between the strength of the economy and the strength of the rupee. You cannot say there is a one to one direct linkage,” he said. The rupee will “find its true level because we also have an import bill. The rupee will maintain its valuation.”
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Asked if there can be further relaxation in FDI norms, Das answered that the foreign direct investment (FDI) policy is “constantly” being reviewed by the government. “It is an ongoing process,” he quipped.
On abolition of the 25-year-old Foreign Investment Promotion Board (FIPB), he said the inter-ministerial consultations are over and the proposals should go shortly to the competent authority for a decision. “The decision I expect will be taken in a matter of few weeks,” he let out.
Finance Minister Arun Jaitley in his Budget for 2017-18 had proposed abolition of FIPB — an inter-ministerial body under the finance ministry’s Department of Economic Affairs that processes FDI proposals and makes recommendations for government approval.
“Abolition of the FIPB would mean that whenever government approvals are required, in those cases the power will be delegated to other authorities. And other authority should by and large be the ministry concerned or the regulator concerned,” he said.
Already, powers for deciding on FDI in non-banking finance companies (NBFCs) have been delegated to the regulator. “So, as long as there is requirement of government approval, there has to be some mechanism in the government to give that approval and that mechanism by and large would be the ministry concerned or the regulator concerned,” he said.
He, however, said wherever security clearance is required, the ministry in question can take it from the Ministry of Home Affairs. “It will have to be taken, you cannot compromise on that,” Das said further.