(Adds Subbarao’s comments in 3rd, 4th, and 9th paragraphs)
Sept. 24 (Bloomberg) -- India will monitor movements in its currency “for some time,” to assess whether and when it needs to introduce steps to curb swings, according to Finance Minister Pranab Mukherjee.
“We will watch the situation for some time,” Mukherjee told reporters yesterday in Washington, where he’s attending the annual meetings of the International Monetary Fund and the World Bank. “As and when intervention will be required, that will be considered at that stage.”
India’s rupee ended its worst week in 18 years as investors sold emerging-market assets in favor of the dollar amid concern that the global economy is slowing. The European debt crisis and risk of another U.S. recession will harm growth in emerging economies, India’s central bank Governor Duvvuri Subbarao said.
“We are rapidly running out of time, and may therefore be running out of solutions,” Subbarao said yesterday, according to a copy of remarks he made at the IMF meeting that was posted on the bank’s website. “Growth momentum will be interrupted if the current global problems are not resolved quickly.”
The Indian currency lost 4.6 percent in the biggest weekly plunge since March 1993, ending 49.43 per dollar at the 5 p.m. close in Mumbai yesterday. This month, the rupee has fallen 6.8 percent even as the Group of 20 Nations sought to quell the turmoil in financial markets.
Talks With Subbarao
Mukherjee said that he had a discussion about the rupee with Reserve Bank of India Governor Subbarao while both are in Washington. Still, “what I feel or what I value is not important” in the context of steps to be taken, Mukherjee said.
Mukherjee told reporters three days ago in New York the Reserve Bank of India is currently not intervening to curb excessive swings in the rupee. The RBI will sell dollars to control movements in the exchange rate, though “right now there is no such situation,” Mukherjee said on Sept. 21.
The RBI may intervene if the rupee falls to levels seen during the financial crisis of 2008 and 2009, a finance ministry official said yesterday in New Delhi, asking not to be identified because he’s not authorized to speak on the matter.
“In 2008, the world responded to the crisis in coordination,” Subbarao said. “Differences were resolved, and governments and central banks acted firmly, decisively and where required creatively. A similar perception of coordination is lacking today.”
The G-20 is “committed to a strong and coordinated international response to address the renewed challenges facing the global economy,” the group said in a statement yesterday.
--With assistance from Cherian Thomas in Bangalore. Editors: Jake Lloyd-Smith, Richard Frost
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