N*EW DELHI:* India needs to be extremely vigilant to check weakness in therupee and the task was to minimise volatility and avoid contagion to othermacro policies, a member of the prime minister’s economic advisory panelsaid on Friday.
Prime Minister Narendra Modi is set to meet officials on Saturday to decideways to address the currency’s weakness and rising fuel prices, though itwas unclear whether the panel or any of its members would attend.
Support measures for the rupee were likely to be announced after themeeting, officials said earlier this week.
Despite the strong economic growth, the rupee has weakened more than 11percent to become Asia’s worst performing currency this year, as India’scurrent account deficit widened, and balance of payments moved into the redas a consequence of higher oil global prices and an emerging marketsell-off that has seen portfolio inflows dwindle.
“Extreme vigilance continues to be required,” panel member Rathin Roy saidin a blog.
Roy said “the present challenge can be effectively dealt with” if vigilanceis exerted, officials communicate effectively, the government maintains itspolicy stance, and doesn’t put other macroeconomic goals at risks throughactions like widening the fiscal deficit by lowering taxes or usinginterest rates to manage the exchange rate.
Roy, who heads National Institute of Public Finance and Policy, a thinktank partly funded by the finance ministry, said weak rupee was unlikely tolead to fall in imports due to strong demand, notably for crude oil andelectronic items.