Rupee at 70: Even as the rupee plunges sharply to breach the 70-mark for the first time ever on Tuesday, evoking concerns, experts point out that the situation is under control given RBI’s forex reserves, and the plunge is unlikely to get out of hand. Noted experts attributed the fall to external factors such as the sharp fall in the Turkish Lira, causing a vicious sell-off in other emerging market currencies as well. We take a look at top reactions following the rupee tumble to record low levels against US dollar for the first time in history.
Bimal Jalan, former RBI Governor
In a telephone interaction with CNBC TV18, Bimal Jalan, former RBI Governor reassured that the situation in under control. “Taking into account the movement in exchange rate the REER (Real Effective Exchange Rate) and inflation, it is not scary. At the current time, things are under control, and our forex reserves are also very high. The RBI has enough reserves, and cna use that when required. Given the REER, this depreciation is still low,” he said.
Subhash Chandra Garg, Economic Affairs Secretary
The fall in the Indian rupee was mainly due to external factors and there is no need to worry at this stage, Subash Chandra Garg told reporters today, adding that the factors were expected to ease in the future.
Pronab Sen, ex- Principal Advisor, Planning Commission
“The only thing to be cautious about is that people shouldn’t get into a knee-jerk reaction. 69.7 or 70 doesn’t mean anything. The real danger is if people over-react. 70, given the current situation is not a bad place to be in. My worry is that if things start going the other way, and rupee appreciates, India is going to start looking better than other EMs. That could lead to further appreciation, which could be far more damaging,” he told CNBC TV18.
R Gopalan, Former Secretary, Economic Affairs
“It is a matter of disturbance of the government. The oil import bill will go up. India’s imports are picking up against the exports and that would put further pressure on the rupee. The nature of the exports business is low technology, so that would keep exporters happy for the short term. However, will they be happy in the long-term, I don’t know,” Gopalan observed in an interaction with the channel.
Anant Narayan, Professor, SPJIMR
“The last couple of days have not been normal. I would argue that the trigger was the wrong one. The turkish lira, but having said that we were always vulnerable. Rupee was due to correction on a REER basis (real effective interest rate). 70 is just a number, but is will hit the headline unfortunately and there will be noise about it. It’s a correction required to make our balance healthier. Our CAD has been worsening over the past couple of years. We can’t keep borrowing money to plug this deficit. We hope this depreciation helps address the CAD. However, that will not happen overnight, as exports and imports take time to respond to new levels of the rupee. However, we can bank on the RBI which still has $400 billion in reserves,” he told CNBC TV18.
Khoon Goh, Head Asia Research, ANZ Research
“The selloff does look a bit overdone. We need to see some kind of circuit breaker before confidence returns. With rupee breaching 70, it’s too soon to say whether we have hit the bottom,” he told the channel.