Rupee slips on devaluation talk, despite ministry denial
mumbai — India’s finance ministry swatted down a media report on Thursday of a possible devaluation of the rupee, dismissing lobbying by struggling exporters seeking a competitive boost from a cheaper currency.
The rupee weakened 0.28 per cent to 67.0750 to the dollar after a television channel CNBC-TV18 reported that the commerce ministry would propose a devaluation, before steadying after the central bank stepped in to prevent a sharp fall. At 0900GMT, it traded off the day’s lows at 67.00, weaker than Wednesday’s close of 66.8875/8975.
“The value of rupee is determined by the market and there is no plan to change policy,” the finance ministry’s economic affairs secretary, Shaktikanta Das, told reporters. “Reports that the government wants to devalue the rupee are false.”
A policymaker stressed that the Reserve Bank of India did not set the rupee’s exchange rate and is “there only to contain volatility”.
“It will always allow the market to decide the rupee’s right price,” this person said. “The RBI doesn’t believe in devaluing the currency. It also doesn’t make sense because our imports are more than our exports.”
In July, India’s merchandise exports fell 6.8 per cent from a year earlier, according to government data showing weak global demand.
A rupee devaluation is required... Indian exporters are outpriced in the global market
Ajai Sahai, director-general of FIEO
Imports fell faster, by 19 per cent, on low oil prices. India ran a $7.8 billion monthly trade deficit.
The Federation of Indian Export Organisations (FIEO), a business group, confirmed it had discussed the rupee’s exchange rate and interest rates with the commerce ministry. “A rupee devaluation is required,” its director-general Ajai Sahai said. “Indian exporters are outpriced in the global market.”
One commerce ministry official said the department favoured the demands of exporters and might raise the matter with the finance ministry before taking it to the cabinet. However, a senior finance ministry official said no proposal had been made to devalue the rupee. — Reuters