NEW DELHI; The Reserve Bank of India Monday reduced the value of the rupee against major currencies by 8.5 to 9.7%, but the government denied that it was a “discreet” devaluation.
In one of the sharpest revisions in a day, the rate of the rupee was brought down by 9.7% against the yen, 9.5% against the dollar, 9.1% against the deutschemark and 8.5% against the pound sterling.
Asked to comment on the latest revision, finance minister, Dr. Manmohan Singh, described it as a “routine” revision undertaken by the RBI, which “takes various factors into consideration”.
He denied that it was a ‘discreet’ devaluation, or that there was any pressure from the IMF or from any other quarter.
“We are in a world of floating currencies and terms like devaluation have lost their meaning,” Singh said.
Leading industrialists and apex bodies of trade and industry have welcomed the revision of the rupees rate saying that it will help the country’s exports, as also help in securing a much larger IMF loan for India.
Significantly, the exchange rate of the rupee, which is pegged to a basket of currencies, has been depreciating sharply against the pound sterling and the deutche mark in the last one year
The Congress-I has described the depreciation in the rupee value against major currencies a result of “the kind of economy we have inherited from the previous government”.
Party spokesman C P Thakur said the adjustment of currency is a continuous process.
Accordingly RBI takes a decision on the value of the rupee and the RBI is an independent and competent authority to take such decisions, he said.
Notwithstanding the denial by the government, financial and industry circles see the move as a “first step” towards securing the IMF loan.
The revision was seen by the chief executive of the foreign exchange dealers association of India, Ananthakrishnan, as a “corrective action” as true value of the rupee against the U S dollar was not reflected in the official exchange rate.
He said further devaluation could not be ruled out in the light of the U S forecast sometime back that the rupee would have to depreciate to a level of 30 rupees to a dollar.
The opposition Bhartiya Janata Panty criticized the government for the downward revision in the value of the rupee and termed it as “unfair”.
Party spokesman K.R. Malkani said this would make the country’s exports cheaper while the cost of imports would soar. The burden of foreign debt would rise by 10%, he said adding that the party wanted a white paper on the prevailing economic situation.
Article extracted from this publication >> July 5, 1991