Rupee not in shambles, govt is ready to take step to curb volatility: Chief Economic Advisor

[1]

New Delhi: With the rupee dipping to an unprecedented low level, the government is ready to take step to curb volatility, Chief Economic Advisor to the Finance Ministry Raghuram Rajan said on Thursday.
The government is not short of options to tackle the fall of the rupee and will take actions as necessary, he told reporters shortly after the rupee fell to a record low. The rupee on Thursday weakened to an unprecedented 59.9275 per dollar after hitting an all-time low of 60, past the previous all-time low of 58.9850 touched on June 11. 
Rajan also said the Reserve Bank of India would take action to support the rupee as appropriate. "We are not short of actions or instruments as and when need arises," he said. "We will be alert to development, we do not like volatility and will take actions when necessary." The rupee, he said, was not in shambles and "we should not be overtly pessimistic". 
Rajan said the Current Account Deficit (CAD) was "large, but we are on way to tampering it. Gold imports are coming off its peak." CAD in June will be better than in May, he added.
Earlier, Finance Minister P. Chidambaram held a meeting with his ministry officials about the rupee fall, which came a day after US Federal Reserve Chairman Ben Bernanke confirmed the Fed would begin winding down its stimulus spending later this year. 
Rajan rules out more steps to curb gold import
Ruling out more steps to curb gold import, Raghuram Rajan said there is no need for knee-jerk reaction as blanket bans on import of the previous metal would be harmful.
"There is no need for knee-jerk reaction to anything. In general, curbs or blanket bans are harmful because they hurt the economy. We are not going to take actions that impinge the medium-term prospects for India," he told reporters here.
Rajan further said the current account deficit (CAD) would be better in June than in May. "We have to take measured actions, rather than knee jerk reactions," he said.
The CAD, which is the difference between the outflow and inflow of foreign currency, is estimated to be around 5 per cent of the GDP in 2012-13 fiscal. The CAD had touched a record high of 6.7 per cent in the October-December quarter.
Trade deficit widened to USD 20.1 billion in May from USD 17.8 billion a month ago. Gold and silver imports rose nearly 90 per cent to USD 8.4 billion in May. Cumulatively, in April-May the import of precious metals stood at USD 15.88 billion.
The government has hiked import duty on gold three times since 2012. This includes the recent 2 per cent hike to 8 per cent to curb demand. Besides, the RBI too has put restrictions on banks on importing gold.
Huge gold imports have put pressure on the country's CAD, which in turn is affecting the value of rupee, that touched a lifetime low of 59.93 to a dollar today.