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Rupee depreciation to help exports: Sinha

Finance Minister Yashwant Sinha on Saturday asserted that the Reserve Bank has managed well to 'calm down' the rupee and said the recent depreciation in the rupee value would in fact, help in propping up sagging exports.

"The Reserve Bank of India came with dollar supply and tried to calm down the foreign exchange market. By and large, it has managed well," Sinha said, adding, "my belief is that recent depreciation in the rupee value vis-a-vis dollar should help exporters."

Though 100 per cent success could not be claimed because of the market being choppy, RBI has been effective in insulating the market from volatility, Sinha said in an interactive session with PTI journalists.

With the country's foreign exchange reserves swelling by over $45 billion, Sinha said, "RBI is in a position to intervene and check the volatility in the forex market."

At one point of time in the last week, the rupee had accorded a new low of Rs 48.44 against the dollar.

In the aftermath of September 11 terrorist attack in US, Sinha admitted that Indian stock and forex markets were under pressure due to the closure of US financial markets for four days, which blocked the flow of funds in the domestic market.

"This created a mismatch in the demand-supply of dollar in the Indian forex market resulting in pressure on the rupee," Sinha said, adding the RBI stepped in rightly to stabilise the situation.

As the foreign exchange sector is market-driven, Sinha said the question of devaluation of the rupee did not arise but justified RBI's role in intervening to check the unusual fluctuations in the rupee-dollar value.

"As far as devaluation is concerned in the present era, there is nothing like devaluation. The government does not devalue. Last time this was done in 1991," Sinha said.

Now the market forces have taken over and depreciation is a good thing for Indian exports.

Central banks' intervention is nothing uncommon and this is the practice, which is resorted to all over the world to stabilise the foreign exchange market, the finance minister said.

Sinha said there was pressure on exports even before the September 11 scenario and this was likely to be accentuated further.

A series of measures would be announced in the next few days to boost exports, Sinha said, adding the rupee depreciation, in the meantime, would act as a bonus for the exporters.

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