New Delhi, May 25: Prime Minister Manmohan Singh today discussed the sharp decline in the value of the rupee and its impact on the economy with RBI governor D. Subbarao and Planning Commission deputy chairman Montek Singh Ahluwalia.
C. Rangarajan, chairman of the Prime Minister's Economic Advisory Council, was also present.
"We met the Prime Minister. We had discussions on what actions can be taken (to arrest the rupee fall). We also discussed the overall situation of the economy," Rangarajan said.
The meeting comes a day after Subbarao indicated that the central bank could sell dollars directly to oil marketing companies to ease the pressure on the rupee.
The governor's comments yesterday helped the rupee to recover and it rose for the second day in a row today. The currency today gained 27 paise to close at 55.39 against the dollar after the RBI intervened in early trade when the currency breached the 56-level.
At the Interbank Forex market, the domestic unit opened lower at 56.02 against its previous close of 55.66 on dollar buying by importers, mainly oil refiners. Soon after it touched an intra-day low of 56.08. However, the RBI's intervention and dollar selling by exporters on hopes of a further fall in the dollar overseas helped the rupee to recover.
The Indian currency had touched an all-time intra-day low of 56.38 yesterday.
Attributing the rupee depreciation to a mismatch between the current account deficit and capital flows in the country, Rangarajan said, in the short-term the RBI should intervene to "curb speculation". In the medium-term, he added, efforts should made to "reduce current account deficit and be pro-active in increasing capital flows".
The RBI has taken steps such as asking exporters to sell half the foreign currency in their accounts and increasing interest rates on NRI accounts.
"One of the options is that the bulk demand for dollar of the oil companies be met directly by the RBI. It was done during my time also. But the proposal should be examined carefully," Rangarajan said. Rangarajan was the RBI governor between 1992 and 1997.
