Former RBI governor, Raghuram Rajan on September 10 assured that rupee is not in a free fall and appropriate measures by Central Bank will control the inflation.
The value of rupee hit its lowest against the growing US dollar owing to escalating global trade war.. The demand for US dollar along with fear amidst importers led to the worst fall of Indian currency collapsing by 94 paise provoking RBI to defend the rupee.
In an interview to CNBC TV18, Raghuram Rajan said that RBI should hint about its effort towards keeping inflation under check. He quoted, “It is very important that RBI continues to signal as it has done so far on its concern about keeping inflation on track, about raising interest rate whenever appropriate, to fulfil its inflation objective … that gives investors confidence that rupee is not going to go in for free fall because ultimately inflation will be in control.”
On the subject of NRI bonds saving rupee, Rajan did not express any particular opinion but he said that they can be described as “weapons you have in the armory”.
Reportedly, The key lending rates have been increased two times in the recent past. The government has instructed the central bank to reduce inflation at 4%, keeping +/-2% as margin.
The former RBI governor also stressed upon monitoring the aggregate fiscal deficit which is likely to increase due to increasing state government fiscal deficit. Further, he suggested on paying attention to the upcoming election budget and unpredictable market situation. As per him, India cannot afford an election year budget.