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Ahluwalia says nothing wrong in rupee depreciating

December 22, 2011 - Mumbai

Planning Commission Deputy Chairman Montek Singh Ahluwalia has downplayed the worry about the recent decline in the rupee and said that trying to defend the currency is not worth the risk it would pose to the country's reserves.

Speaking at an event here, Ahluwalia said that there was no harm in the rupee declining.

"The current account balance would widen. The financing available for the current account balance becomes uncertain and in the short run they may even be shortened. There is nothing wrong in the rupee depreciating. I mean, the alternative would be to try to fix the rupee and lose a large amount of reserves. That would not have been a sensible policy," he added.

India had foreign exchange reserves of nearly 307 billion dollars as of earlier this month.

The rupee is down more than 16 percent since July peaks and is Asia's worst-performing currency this year, although it has bounced off record lows hit last week after the central bank ook steps to prop it up.

Ahluwalia moreover, said that one should wait for the third quarter gross domestic product (GDP) figures before making a prediction about the growth rate.

He also said that economies the world over had been sluggish and India was not an exception.

"My own view is that we should wait for the third quarter numbers before we make a good forecast. You know when an economy is decelerating; it could easily do a little bit more or a little bit less. There is no doubt that the economy has slowed down. The main thing to remember is that globally this is a very difficult year for the world economy. Every economy is slowing down," added Ahluwalia.

India's gross domestic product growth fell to 6.9 percent in the second quarter of the financial year, slipping below eight percent for the third straight quarter.


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