No cause for alarm on rupee decline, says Chidambaram

Finance Minister P. Chidambaram today said that there was no cause for alarm on the rupee decline, and added that the capital inflows were strong.

Chidambaram, who was addressing the 66th annual general meeting of Indian Banks' Association (IBA), said that the rupee would stabilise and find its correct level.

"The currency has depreciated, so, the Indian rupee has depreciated. But the flows are strong; inflows are very strong. Inflows in April and May have been very strong. Therefore, it's not a cause of alarm. It adds to import costs, that I agree, so, its' not a cause for alarm and I think the rupee will stabilise and will find its correct level," he said.

Chidambaram further said that India could achieve its fiscal deficit target of 4.8 percent in the current fiscal year ending in March 2014.

He said the government hopes to achieve and improve the current year's fiscal deficit target without compressing expenditure, while he is also hopeful that investments will pick up in the remaining three quarters of the year.

Chidambaram also said that capital flows in the months of April and May have been quite strong.

"Capital flows in April and May have been quite robust," he added.

The rupee today declined by 16 paise against the US Dollar in late morning trade at 56 rupees 89 paise after reaching 11-month low of 56 rupees 97 paise in early trade on the Interbank Foreign Exchange market due to heavy dollar demand from importers.

Besides, increased demand for the American currency from importers and a weak opening in the domestic equity market also put pressure on the rupee.