Debunking speculation that the rupee is headed down to 70 to the dollar, Chief Economic Advisor Raghuram Rajan on Friday said he did not find any compelling analysis to support this argument.
At the same time, Rajan asserted the Finance Ministry will not hesitate to take any step to stem the rupee’s fall. “We do not like exchange rate volatility. We do not like an excessively weak rupee. We are not trying to target an excessively weak rupee,” Rajan said at an Exim Bank event here on Friday.
He said the Reserve Bank of India, SEBI and the Government were closely watching developments in all markets. “We have instruments to ensure stability in the markets. We will take action. Yes, there is some weakness in rupee because of external factors. But it is not to say we are not watching developments,” Rajan said.
Talking to newspersons after meeting top investment bankers and custodians of foreign investors earlier, Rajan said: “They (investment banks) gave us a lot of ideas, including sovereign and NRI bond issues. All options are on the table and we will examine them. As and when the need comes, we will consider the options.”
The meeting discussed ways to raise funds overseas and boost dollar flows into the country and was attended by top officials from among others Goldman Sachs, Bank of America, Deutsche Bank, JP Morgan, Citi Bank, SBI-SG Global Securities and Barclays. “This was not a meeting to take a decision; it was a meeting to get their inputs. We have got a bunch of ideas that we now have to reflect on,” Rajan said. Improving liquidity in the corporate bond market and ways to reducing transaction costs were also discussed. “Their suggestions (were) on a number of issues, ranging from ways we can make the market more liquid to what kind of funding needs India might have,” he added.
According to sources, the participants also talked about reviewing the guidelines for external commercial borrowings. The present guidelines prevent the parent company from raising funds overseas on behalf of its special purpose vehicle (SPV). Since an SPV does not enjoy the same goodwill, it may have to borrow at higher rates or at terms that are not very attractive. The participants felt that this needed to be rectified.