New Delhi, Aug 23 (PTI): Reeling under the battering suffered by the rupee and markets, Finance Minister P Chidambaram and RBI Governor D Subbarao Thursday sought to assuage investors that there are no capital control measures in the offing and there is no need for panic in markets.
While maintaining that they were not targeting a level for the rupee, both of them said it was undervalued. The RBI will revisit measures to check speculation in forex market once stability returns, they said.
"We believe that the rupee is undervalued and has overshot what is generally believed to be a reasonable and appropriate level," Chidambaram said at a press conference on a day the rupee hit a lifetime low of 65.56 to a dollar.
After holding a three-hour long discussion with Subbarao, governor-designate Raghuram Rajan and other key officials of his ministry, he said, "there is no cause for the panic that seems to have gripped the currency market and that is feeding into other markets.
"We are confident that stability will return in these markets and we can get on with the task of promoting investment and growth", he said.
Stressing that there was no reason for "excessive or unwarranted pessimism", the Minister said that the recent steps taken by the Reserve Bank to reduce volatility in forex market and quell speculation would be revisited.
"There was--and is--no intention to introduce any type of capital control, including controls on repatriations. It is not the policy of the government of the RBI to resort to capital control or reverse the direction of capital account of liberalisation. The measures that were taken last week will be revisited as stability returns", he said.
Subbarao in a separate media briefing said India has adequate forex reserve to meet the current situation and the central bank will take appropriate measures to curb rupee volatility.
Conceding that growth will remain flat in the first quarter of the current fiscal, Chidambaram said, it will pick up in the later part of 2013-14.
Chidambaram said: "We are in better health than many other countries of the world ... We expect growth will pick up in Q2 to Q4."
To restrict outflows of foreign currency, the RBI on August 14 announced stern measures, including curbs on Indian firms investing abroad and outward remittances by resident Indians.
Chidambaram hoped that capital inflows in due course will correct the position of rupee.
"There is still volatility in the currency market that is unacceptable. Stability must return," he said.
The Minister also said that government will make all efforts to contain fiscal deficit at 4.8 percent and CAD at 3.7 percent of GDP or USD 70 billion this financial year.
He said the CAD could be even lower than USD 70 billion.
The Finance Minister further said that global slowdown and domestic factors, which have been there for 2-3 years, pose challenges to the economy.
The targets of the Fiscal Responsibility and Budge Management were breached and inflation crossed 10 percent.
"And now .... We are trying to retrieve the ground that we have conceded. We have retrieved a significant part of the ground, but still work remains to be done.
"WPI inflation is being contained... We have brought fiscal deficit down. We are paying a price for global slowdown as well as domestic factors which are indicated," he said.
When asked if the government could come out with sovereign bond issue, Chidambaram said all options are on the table.
"Which option we will exercise at what time is a matter of judgement by the policy maker. I think it completely wrong to say an option is off the table," he added.