Rupee won’t rise as last year: FM
March 2, 2008 – 9:09 pmvia Action Forex
NEW DELHI: Rupee is unlikely to appreciate as sharply this year as last year, when its gains were ‘extraordinary’ and the economy will grow close to 9%, FM Chidambaram said on Sunday. While he aims to contain inflation at about 4%, this would depend on how world food and commodity prices move in the coming year. The rupee gained more than 12% against the dollar in 2007, largely driven by huge capital inflows, rising interest rates and a weakening dollar, hurting some labour-intensive export sectors and complicating management of monetary policy. ‘I don’t know whether the rupee will appreciate but even if it does I don’t think it will appreciate as sharply as it did in 2007,’ Chidambaram said. ‘2007 saw an extraordinary appreciation of the rupee.’ The partially convertible rupee closed at 40.01/02 per dollar on Friday. It hit a near-decade high of 39.16 last November, driven up by portfolio inflows into the stock market, but last month slipped to a five-month low of 40.25. ‘We would like a real GDP growth of 9%-plus, which means we must contain inflation at 4% or below. That is the ideal situation,’ FM said. ‘But the ideal is an aspiration. What we will achieve is, I hope, pretty close to the ideal.’ The Economic Survey 2007-08 said however that keeping expansion at 9% a year would be a challenge due to inflation and infrastructure constraints. It warned raising growth to double digits, which has been a mantra of this government, would be even harder. While government has to bring the fiscal deficit down to 3% of GDP in 2008-09, FM has a aggressive target of 2.5% from an estimated 3.1% for this financial year.
