Reserve Bank of India Governor Raghuram Rajan on Monday said neither RBI nor the government intends to undervalue the rupee to pursue growth unlike countries such as China and Japan because it leads to a lot of problems over time.
Inaugurating the 4th edition of MSME summit here, he said undervaluation of the domestic currencys exchange rate is not the intent of RBI and Government of India.
Some people point out that the growth of countries like China, Japan and Korea was due to undervaluation of exchange rate and they also want India to follow the same path.
He said however that there are a lot of problems with undervaluation over time, which is reflected in the situations that some of the countries find themselves today.
Pointing out that sustained undervaluation for a long period of time was not a feasible or desirable strategy for growth, he said this was why he firmly believes that RBIs philosophy of not focusing on the level of exchange rate…trying to manipulate up or down…but trying instead to minimise situation of extreme volatility.
He added: So, rate will not be a source of competitive advantage or disadvantage. We want to make reasonable, predictable, reasonably stable and let the advantage (for growth) come from capabilities of MSMEs from cost effectiveness, innovations and ideas, rather than some kind of exchange rate valuation.
Be Part of Quality Journalism
Quality journalism takes a lot of time, money and hard work to produce and despite all the hardships we still do it. Our reporters and editors are working overtime in Kashmir and beyond to cover what you care about, break big stories, and expose injustices that can change lives. Today more people are reading Kashmir Observer than ever, but only a handful are paying while advertising revenues are falling fast.