New Delhi : NITI Aayog Vice Chairman Rajiv Kumar on Tuesday said weakening of rupee is not a cause of worry as it is still overvalued by 5 to 7 per cent in terms of real effective exchange rate.
The rupee breached the 69-mark against the US dollar for the first time last week amid inflation concerns, weak global cues and other headwinds.
“Rupee is overvalued by 5 to 7 per cent in terms of REER. There is no reason to worry… RBI has always maintained and practised that it will never interfere directly in the market to protect the rupee at any particular level,” Kumar said.
Real Effective Exchange Rate (REER) refers to the weighted average of a country’s currency against a basket of major currencies after factoring in inflation. Further, Kumar pointed out that the rate of inflation in India has been much higher than the global rate and that is what determines the REER.
“And the REER today at 69 or 68.97 is still over-valued by 5 to 7 per cent,” he said, adding there is no question at all of either getting worried, nervous or intervening in the market. During the UPA-II regime in 2013, the rupee had weakened from 57 to 68 a dollar in three months, and a comparison with current situation would be misplaced.
His remarks come against the backdrop of criticism in certain quarters about the government’s handling of the rupee. Addressing a press conference on initiatives taken by NITI Aayog, Kumar said the economy is likely to grow at 7.5 per cent in 2018-19, and further at 8 per cent in 2019-20. “By 2022, the country will start growing at 8.5 per cent, and thereafter it will sustain it,” he said.
“Even though the world economy is facing some turbulent time because of Trump’s tantrums, we (Indian economy) are much better placed than ever before,” Kumar noted. According to him, no other government in the past has taken so many reforms as the current government has taken in the last four years. There has been ample employment generation in the last four years and next year by this time, “we will have household survey data by NSSO,” he noted.
NITI Aayog has sent the development agenda for ‘New India 2022’ to chief ministers for their comments. Noting that the Cabinet has approved disinvestment of some PSUs, Kumar said, it could happen in the second and third quarters of the current financial year.
About Air India disinvestment, the NITI Aayog vice chairman said the government is considering the whole issue afresh. The proposed strategic stake sale of the national carrier failed to attract any initial bidders in May.