Rupee undervalued, but no need for excessive pessimism, says Chidambaram

Finance Minister P Chidambaram allayed investors' fears about the rupee falling 5.5 per cent in five days, saying though the currency is undervalued and has overshot appropriate levels, there is no need for "excessive and unwarranted pessimism".

After maintaining silence over the domestic currency's fall this entire week, the finance minister addressed a press conference on Thursday, a day when the rupee breached 65-mark against dollar, to assert that there was no cause for panic and said stability will return to currency markets as government continues to promote investment and growth.

"We believe that rupee is undervalued and has overshot what is generally believed to be a reasonable and appropriate level," he said.

Chidambaram, who earlier in the day held a three-hour long discussions with Reserve Bank of India (RBI) Governor D Subbarao and his successor Raghuram Rajan, said: "There is no cause for panic that seems to have gripped the currency market and that is feeding into other markets. We are confident that stability will return to these markets and we can get on with the task of promoting investment and growth."

Stressing that there was no reason for "excessive or unwarranted pessimism", the finance minister said the recent steps taken by RBI to reduce volatility in forex market and quell speculation would be revisited.

Chidambaram also said there was no move to introduce any capital control measures to check current account deficit (CAD).

"There was - and is - no intention to introduce any type of capital control, including controls on repatriations. It is not the policy of the government or the RBI to resort to capital control or reverse the direction of capital account of liberalisation. The measures that were taken last week will be revisited as stability returns," he said.

Subbarao in a separate media briefing said India has adequate forex reserve to meet the current situation and the central bank will take appropriate measures to curb rupee volatility.

Highlights from the conference:

> All emerging market economies appear to be affected by currency volatility: FM
> No reason for excessive or unwarranted pessimism: FM
> FM reaffirms commitment to contain fiscal deficit at 4.8 pc of GDP and CAD at USD 70 billion in 2013-14
> No intention to introduce capital controls: FM
> Exploring structural measures to reduce CAD: FM
> Growth to remain flat in the first quarter of current fiscal: Chidambaram
> Growth revival is the focus of government; no cause to panic that has gripped currency markets: FM
> Growth revival is the focus of government; no cause to panic that has gripped currency markets: FM
> Recent measures to quell speculation in rupee will be reversed once stability returns: Chidambaram
> We are not targeting any particular level for the rupee; we want a stable currency: FM
> Rupee is undervalued and overshooting appropriate levels: FM
> India has to brace up for consequences of US Federal Reserve's decisions: Chidambaram