The Centre is concerned over the rapid rise in rupee vis-a-vis dollar but will not intervene other than providing some succour to exporters, Finance Minister P Chidambaram said here.

“It (rise of rupee) has some consequences, particularly for exporters,” he told PTI on the over 11 per cent rise in rupee against the greenback this year. If the package given in July was not sufficient the government could think of more steps to help them tide over the situation, he added.

Mr Chidambaram, who also addressed the Peterson Institute for International Economics, said unless the US government takes some steps India cannot do anything in this regard.

RBI can take a call
“Our exchange rate has a symbiotic relationship with the exchange rate of the US... The rupee is stable against the Euro and many other currencies. It is only against the dollar the rupee has appreciated by nearly ten to ten and a half per cent in the last eight to nine months,” he said.

In this context, Mr Chidambaram made it clear neither the government nor the Reserve Bank of India had a view on the exchange rate, which he said was market-determined and would remain so.

In a bid to calm the market, he said “if there is any volatility or disorderly movement I suppose the central bank will intervene using whatever instrument it has. The central government does nothing on that behalf”.
Mr Chidambaram said the government was concerned about rupee appreciation. The policy was to allow two-way movement of the exchange rate, but the movement should be “orderly”, he said.

The Rupee touched 39.63 to a dollar today, its highest level since April 1998. The RBI has refrained from intervening as this makes imports cheaper, helping it to contain prices in the world’s second-fastest growing economy.

“Exporters have been taken by surprise. We offered them a package a couple of months ago but if that is not adequate then we would have to think of ways and means by which they can be given a helping hand to tide over the rest of the year,” Mr Chidambaram said.

The Centre had given a Rs 1,400 crore package to exporters in July and has earlier indicated the export target of $160 billion for 2007-08 could be scaled down if the rupee continues to rise.
“But in the medium to the long run, exporters would have to learn to hedge to reprice their export contracts in tune with exchange rates,” the Finance Minister said.

The rupee’s real and nominal effective exchange levels are “way beyond comfort levels” at the moment, but “that is something we have to learn to live with”, he said.

“Unless the US government does something about the dollar, there is nothing much I can do about the rupee, as far as the rupee-dollar parity is concerned,” Mr Chidambaram said.

“Monetary policy is the province of the Reserve Bank of India. Even if I give advice which I rarely do, I would give it privately to the Governor (of RBI),” he added.

On the US subprime crisis which rattled financial markets worldwide last few weeks, he said it does not have an impact on India “because there is no Indian bank, to the best of my knowledge, which has exposure in subprime mortgage markets.”

Talking about India’s economic growth,  he said “We believe it is possible to sustain the factors that are driving economic growth and consolidate the gains. There are, of course, some risks,” he said, pointing to the uncertainty of the rainy season and the price of crude oil being two major internal and external risks.