Principal Economic Adviser in the Finance Ministry Sanjeev Sanyal on Thursday said any particular change in approach was not needed in managing currency after concern over the impact of rising foreign exchange inflows on rupee.
The foreign exchange inflows have sparked appreciation in rupee against dollar this year, raising concerns about the impact on export competitiveness at a time of slowing economic growth.
According to BTVi, Securities and Exchange Board of India (SEBI) Whole-time Member G. Mahalingam was of the strong view that foreign inflows must be allowed in a calibrated manner and he made these remarks in the context of allowing foreign investors in commodities trading and masala bonds.
“The RBI has well-established record of managing the rupee… over the last many months, the Reserve Bank of India has been accumulating a sizeable amount of (foreign exchange) reserves and that particular approach will continue. We do not, however, target any level as such. The Reserve Bank is competently doing it for many years and will continue to do so in future. I don’t think any particular change in that approach is needed,” Sanyal told BTVi in an interview.
Speaking on the latest Gross Domestic Product numbers of the first quarter of the current fiscal, he said the slowdown in the economy as shown in the published data was not a surprise as the scenario was clear as per the Economic Survey.
The GDP slowed to 5.7 per cent in the April-June period from 6.1 per cent in the preceding quarter.
According to Sanyal, destocking before the implementation of Goods and Services Tax was one of the factors of economic slowdown. NPA clean-up from the banking system was also responsible for slowing the economy as the clean-up has constrained the ability of financial systems to expand.
“The clean-up is gaining apace and I am confident that by the end of this year or early next year, the banking system will be in a position to start expanding again,” he added.