India’s currency is currently over-valued by 5-7 percent, a senior government adviser said, indicating that New Delhi is unlikely to support intervening in the market despite the currency shedding close to 7 percent against the dollar this year.
The partially convertible rupee fell to a record low of 69.0950 to the dollar and was trading at 68.58 in late trade. It is the worst performing currency in Asia this year.
“The rate of inflation in India has been much higher than the global rate and that is what determines the real effective exchange rate,” Rajiv Kumar, vice chairman of NITI Aayog, a government think tank, told reporters in New Delhi.
“And the real effective exchange rate today at 69 or 68.97 is still over-valued by 5 to 7 percent.”
Kumar, who advises the government on economic issues and is on the board of the Reserve Bank of India, said intervention was not necessary.
He said India was not aiming to protect the rupee at any particular level and any RBI intervention was aimed at only containing volatility.
“RBI has always maintained and practised that they will never interfere directly in the market to protect the rupee at any particular level.”