Following are Planning Commission Deputy Chairman Montek Singh Ahluwalia’s quotes on rupee and inflation:
On exchange rate: The Government policy is that we are not fixing the exchange rate. We are allowing the exchange rate to move along with the market and the Reserve Bank of India intervenes when it feels that there is too much speculative pressure. But if every currency is moved, it is not speculative pressure. It is up to the RBI, which has lot of power. It will intervene when it thinks it is necessary.
On whether the worst is over for rupee or is it yet to come: You should ask Ben Bernanke because we are all on a “storm-toss’’ sea. Let’s be very clear that as far as the Indian economy is concerned, I am absolutely confident that anybody wanting to look at India will say that things are getting better here. Lots of things have been done and more things are happening.
Mid-term forecast for rupee, inflation and imports: This concept of untouched territory is little exaggerated. If the Indian inflation rate is, let us say 5%, which many people will consider comfortable and the global inflation rate is 2%, then people will think rupee should depreciate by 3% on an average. In that case it will touch uncharted territory every day. Many countries have managed to cope up with the degree of volatility we have seen, and it is not something that it is unusual.
On inflation: The Government places highest importance on bringing inflation under control. Whatever, index you look at, you will note that the inflation rate is coming down. The most recent thing was the Wholesale Price Index. It does show gradual reduction taking place in inflation. In a situation when exchange rate depreciates, imported prices will go up a little but then other prices may come down.