LIVE TV DownloadNews18 App
News18 English
»
2-min read

Rupee Could Get Significantly Undervalued if it Keeps Falling at This Rate: Raghuram Rajan

In an interview to CNBC TV18, Rajan said it was important for the RBI to continue to give signal that it would keep inflation under check as he hoped that the rupee would not go in for a free fall.

News18.com

Updated:September 11, 2018, 10:02 AM IST
facebookTwittergoogleskypewhatsapp
Loading...
New Delhi: Former Reserve Bank Governor Raghuram Rajan warned that the rupee could get significantly undervalued if it keeps falling at the current rate.

The rupee crashed below the 72-mark to end at a life-low of 72.45 against the US dollar on growing fears of contagion from an emerging-market rout and escalation of a global trade war.

Heavy speculative dollar demand along with panic among importers sent the domestic currency tumbling by a sharp 94 paise to hit a historic low of 72.67 in mid-morning trade, triggering the central bank intervention to defend the currency.

In an interview to CNBC TV18, Rajan said it was important for the RBI to continue to give signal that it would keep inflation under check as he hoped that the rupee would not go in for a free fall.

"It is very important that RBI continues to signal as it has done so far on its concern about keeping inflation on track, about raising interest rate whenever appropriate, to fulfil its inflation objective ... that gives investors confidence that rupee is not going to go in for free fall because ultimately inflation will be in control ...," he said.

He said it was a temporary illusion that developed countries are growing strongly that was driving the growth of the dollar, but in reality, much of the global growth comes from emerging markets.

He said the developed markets would also crack if the emerging markets slow down.

Nevertheless, Rajan said he has little confidence that the US administration recognises trade interlinkages and said policy would only get tighter as the Federal Reserve would continue to raise rates.

On suggestions of NRI bonds to check rupee depreciation against the US dollar, Rajan remained non-committal, but said they are "weapons you have in the armoury". The RBI has increased the key lending rate twice in the recent past on inflationary concerns.

The government has tasked the RBI to contain inflation at 4 per cent with a margin of +/- 2 per cent.

Rajan also said India has to pay attention to the aggregate fiscal deficit, as state governments have increased their fiscal deficits. "The fact that India is growing quite strongly gives some positive but in general we have to pay attention," he said.

Rajan also stressed that India cannot "afford an election year budget" going forward given the kind of turmoil is there in the financial market. "It has to be a responsible one," he added.



Catch the Biggest Newsmakers and the Biggest Newsbreaks on CNN-News18, your favourite English TV news channel. Keep watching CNN-News18 at just 50 Paise per Month. Contact your cable /DTH operator Now!
*Rental / capacity fee of Rs.130/- as charged by cable / DTH operator may apply. **GST extra.

| Edited by: Aakarshuk Sarna
Read full article
Loading...
Next Story
Next Story

Also Watch

facebookTwittergoogleskypewhatsapp
Most Active
Company Price Change %Gain
Yes Bank 219.00 -1.02
Dr Reddys Labs 2,563.35 -3.90
Reliance 1,244.45 1.65
ITC 280.10 0.79
Axis Bank 686.60 -1.21
Company Price Change %Gain
Yes Bank 218.70 -1.04
Dr Reddys Labs 2,556.90 -4.21
Reliance 1,243.50 1.47
Jet Airways 232.55 2.99
GRUH Finance 239.30 -3.22
Top Gainers
Company Price Change %Gain
BPCL 327.85 3.87
NTPC 136.25 3.81
Power Grid Corp 181.50 3.74
Bharti Infratel 306.90 3.26
GAIL 317.75 3.18
Company Price Change %Gain
NTPC 136.20 4.13
Power Grid Corp 181.50 3.80
ONGC 135.10 2.27
Reliance 1,243.50 1.47
Larsen 1,243.25 1.31
Top Losers
Company Price Change %Gain
JSW Steel 266.90 -4.90
Sun Pharma 422.90 -4.08
Dr Reddys Labs 2,563.35 -3.90
Tata Steel 467.50 -3.12
Vedanta 147.30 -2.93
Company Price Change %Gain
Sun Pharma 423.30 -3.94
Tata Steel 467.45 -3.12
Vedanta 147.45 -2.87
Hero Motocorp 2,702.30 -2.75
Bajaj Finance 2,557.50 -1.90

Live TV

Loading...
Countdown To Elections Results
  • 01 d
  • 12 h
  • 38 m
  • 09 s
To Assembly Elections 2018 Results