Seeking to assuage investors worried over declining value of the rupee and falling stock markets, the Finance Ministry on Monday said country's economic fundamentals are "very strong" and there is no cause for concern.
"Current Account Deficit (CAD) is below USD 50 billion. Foreign exchange reserves are (at) all-time high. We have very strong fundamentals...I don't think that there is any cause of worry," Economic Affairs Secretary Arvind Mayaram told reporters. He was responding to a query regarding the decline in the value of the Indian rupee, which has slipped to 62.75 against the US dollar.
The stock markets too plunged, with the benchmark BSE Sensex declining over 300 points in early trade. Mayaram further said that there was no reason for the Indian currency to be impacted by something happening in Argentina. "I do not see any correlation," he added. He was apparently referring to the massive fall in the value of the Argentina's currency peso last week.
The rupee, he said, "will remain range-bound and we should not get overtly concerned." Every currency behaves based on the strength of its own fundamentals, he said, stressing there had been considerable improvement in the CAD situation. The CAD, which is the difference between inflow and outflow of foreign exchange, slipped to all time high of USD 88.2 billion in 2012-13 or 4.8 per cent of the GDP.
Situation has improved with the government and the Reserve Bank taking series of steps to contain the CAD. In the current financial year it is expected to fall below USD 50 billion.
On whether the recent decision of the RBI to withdraw pre-2005 currency notes was aimed at curbing black money, Mayaram said it was "not an effort to tackle black money which is a complex thing." Also, he added, withdrawal of a series of notes which have fewer security features cannot be termed a demonitisation of currency notes.