MUMBAI – India’s finance minister said Thursday that the intense selling pressure on the rupee is exaggerated and that the currency market “panic” was unnecessary.
The rupee, which has hit record lows for five straight trading days, slumped to 65.56 against the dollar on Thursday as uncertainty about the future of the U.S. stimulus program added to growing fears about the state of the Indian economy.
“The panic that has gripped the currency market is unwarranted,” P. Chidambaram told a news conference, describing the volatility in the currency market as “unacceptable.” “It is almost universally accepted that the rupee is undervalued and has overshot the reasonable and appropriate level.”
The rupee has lost about a fifth of its value this year and there are doubts over whether policy makers are in control of the situation. Global ratings agency Fitch warned in a statement Thursday that India, which it rates BBB with a stable outlook, may see its credit ratings lowered if it does not halt the fall in investment.
“Unless reforms related to growth and lowering the current account deficit are addressed, things will not improve,” said economist Devendra Pant with India Ratings, part of the Fitch group.
The rupee recovered marginally from its day’s low to end trading at 64.55 Thursday, while Indian shares closed up 2.27 percent, or 407.03 points, to 18,312.94 points, snapping four straight days of declines.
Chidambaram said there was no plan to resort to capital controls and that reviving growth, which hit a decade low of 5 percent in the year to March, would remain the government’s focus.
“We are exploring structural measures to reduce the current account deficit and improve foreign capital inflows,” he said, adding that the deficit would be contained at $70 billion this fiscal year.