HDFC Ltd Chairman Deepak Parekh on Tuesday stated the Reserve Financial institution has been very prudent in dealing with the alternate fee and the latest depreciation within the rupee shouldn’t be a mirrored image of a change within the fundamentals of the nation’s economic system.
He stated the nation has sufficient international alternate reserves to cowl its imports for 9 months and the present shortfall in reserves doesn’t warrant alarm.
Parekh stated the Worldwide Financial Fund (IMF) is right in its steering that within the present state of affairs, international locations ought to make extra considered use of their international alternate reserves to guard them from doable future shocks and intervene solely to make sure macro-economic stability. must.
This implies permitting alternate charges to regulate, whereas utilizing financial and financial devices to align the inflation fee nearer to the goal fee.
“In my opinion, RBI has been extraordinarily prudent in its alternate fee administration. Now we have by no means seen a depreciation within the rupee and the present foreign money depreciation shouldn’t be a mirrored image of a change within the fundamentals of the Indian economic system,” the veteran banker stated whereas talking at an occasion organized by the Indian Chamber of Commerce.
Final month, Finance Minister Nirmala Sitharaman additionally defended the autumn within the foreign money, saying that the rupee has not weakened however the greenback has strengthened.
The home foreign money has depreciated by about 11 p.c to date in 2022. It crossed the 83 mark for the primary time on 19 October.
Parekh stated the greenback stays a protected haven. The affect of the greenback strengthening has been extra extreme for rising markets because it triggers the chance of mood tantrums and a sudden giant outflow of capital that may have a destabilizing impact on commerce and finance.
He stated many international locations’ international alternate reserves have shrunk, partly due to central banks defending their currencies and largely attributable to adjustments in valuations. In India’s case, the international alternate reserves, which stood at $642 billion in October final yr, at the moment are $528 billion.
“Our import cowl is at present 9 months as in comparison with 15 months in the past. In 2013, on the time of the taper tantrum, India had an import cowl of 6.5 months. In 1991, India had international alternate reserves for simply 15 days. Fortuitously, the present state of affairs doesn’t require a warning alarm,” Parekh stated.
He stated that since inflation stays outdoors the consolation zone of 2-6 per cent, RBI has no possibility however to hike rates of interest.
Nevertheless, Parekh is assured that the central financial institution is not going to observe the steps of the US Federal Reserve and can hike charges by 75 foundation factors.
“They (RBI) will hike cautiously and won’t destabilize the economic system. They’d be extra prudent in balancing development versus rates of interest hike,” he stated.
The Federal Open Market Committee (FOMC) assembly is underway and the outcomes shall be introduced on Wednesday.
Parekh stated that regardless of the worldwide slowdown, there’s normal consensus that India will proceed to be among the many quickest rising main economies of the world.
“Sure, GDP development for FY12 could also be lower than 7 per cent, however that’s no cause to despair. It is very important word that there’s inherent resilience that’s now embedded within the Indian economic system,” Parekh stated.