Rupee depreciation expected: Rangarajan

The depreciation in the value of rupee was expected to an extend and could be temporary, said Prime Minister’s Economic Advisory Council Chairman C Rangarajan. He added the entities, which have a foreign exchange commitment must always hedge themselves from against the trends in the value of rupee.

Speaking to reporters on the sidelines of the Annual Day celebrations of the Madras School of Economics, where he serves as chairman, Rangarajan said, “There is some panic regarding the direction in which the advanced economies will move and all of this is contributing to a situation in which the currencies are taking some beating.”

The rupee has fallen at a time when currencies in many other emerging economies also took a beating. This is a reflection of what is happening not in India, but in the rest of the world, he said.

But it must also be noted the rupee had stayed very strong for quite a number of years and therefore some decline in its value was also expected, he said. We would have to wait and see for some more time before coming to a conclusion where the rupee would settle, he added.

Any entity, which has a foreign exchange commitment must always hedge itself and I do hope most of them would have hedged themselves against the trends in rupee value, he said.

Commenting on the possible global economic slowdown, Rangarajan said the United States is taking efforts towards reviving the economy and the European debt crisis might also be resolved in some way. He said things might be more clear in a month’s time.

Allaying possibilities for recession, he said the negative growth might not happen while the growth rate of developed economies would be slowed down and if it continued to remain so, would have some impact on India both in terms of trade flows and capital flows.