Centre taking steps to stabilise rupee, says Chidambaram

Asserting that the government is continuously monitoring the emerging external sector developments leading to higher CAD and rupee depreciation, Finance Minister P. Chidambaram on Tuesday informed the Parliament that a slew of steps have been taken to check forex volatility.

"(The government) has taken a slew of initiatives to boost exports and reduce imports, encourage capital flows to facilitate financing of CAD and stem the volatility in the exchange rate of the rupee," he told the Rajya Sabha in a written reply.

The Finance Minister, while referring to the measures taken by the government to support the rupee, said they include 'raising the rate of interest subvention from 2 to 3 per cent that will benefit exporters and small and medium enterprises, hike in import duty on gold, liberalisation of FDI, etc.'

Regarding the current account deficit (CAD), Chidambaram said it has declined to 3.6 percent in the January-March quarter from 6.5 percent in the previous quarter of 2012-13.

Meanwhile, Minister of State for Finance Namo Narain Meena in a separate reply said the rupee depreciated significantly in the second half of 2011-12 owing to the impact of the Eurozone crisis on the Indian forex market.

Meena said the sharp fall in the value of the rupee can be explained by supply-demand imbalance in the domestic foreign exchange market on account of volatility in FII inflows.

The Minister of State for Finance, while elaborating upon the steps taken by the government and the RBI to stabilise the rupee, said the Central Bank has intervened in the market and had tightened liquidity by raising borrowing costs for banks.