No cause for concern: FM, industry

By Our Special Correspondent

NEW DELHI, MAY 10. Industry associations today appealed for restraint and the Union Finance Minister, Mr. Yashwant Sinha, said the fall in the rupee value did not indicate that the foreign exchange market was volatile even as the rupee breached the 44 mark for the first time. The appeal for self-restraint from industry associations came even as panic conditions were reported from the forex market with state institutions looking for dollars.

Industry analysts felt there could be several reasons for the rupee plummeting on Tuesday and Wednesday. Prime among them is bunching of dollar mobilisation from the market and the rising interest rates in international markets, especially the U.S. Besides, a correction in the exchange rate between the rupee and the dollar was long overdue, they added, suggesting that all these factors could have got combined to put pressure on the rupee.

While refusing to comment on the specifics of the rupee value while briefly interacting with newsmen, the Finance Minister said the narrow spread between the selling and the buying value of the rupee appeared to indicate that the market was not volatile.

On the other hand, apex industry associations reposed their faith in the RBI and felt the slight fall should not be cause for undue concern. ``The prices are market determined and are dependent on demand and supply of relative currencies,'' pointed out the President of the Federation of Indian Chambers of Commerce and Industry, Mr. G. P. Goenka.

In a statement issued today, Mr. Goenka said the RBI was keeping a close watch on the currency market and would take appropriate steps to defuse excessive speculation, if it was taking place. However, it has to be kept in mind that violent fluctuations in the exchange rate pose problems particularly for large value imports such as oil, he added.

The reaction from the Associated Chambers of Commerce and Industry of India (Assocham) was also on similar lines. The Assocham chief, Mr. Shekhar Bajaj, said there was a pending correction of around four per cent in the rupee and dollar exchange rate over last year due to differences in the domestic and international inflation rates. Therefore, further depreciation of the rupee cannot be ruled out.

Send this article to Friends by E-Mail

Section  : Business
Previous : Sensex down 120 points on FII selling
Next     : 'Further slide likely'