Mumbai: Attributing rupee fall to rising current account deficit (CAD), RBI Deputy Governor K C Chakrabarty on Thursday said the central bank will be taking steps to check currently volatility.
    
"The issue is that...if we have a CAD and Fiscal Deficit, rupee has to orderly depreciate and if it doesn't depreciate orderly, sometime it would be depreciating in-orderly," he said at a function.
    
Chakrabarty said "(the central bank) will do everything to see that volatility is minimized" but did not disclose its strategy. RBI has forex reserves of over USD 290 billion to deal with the situation on the external sector.
    
Planning Commission Deputy Chairman Montek Singh Ahluwalia too blamed the falling value of rupee to high CAD saying "let us face it, in a situation where there is a large current account deficit, you don't expect the rupee to strengthen. I am not surprised if it is weakened."
    
In the past eight days, rupee has weakened by over 150 paise against the dollar, amidst concerns of withdrawal of stimulus by the US. It moved in a range of 56.89-57.00 per dollar during the morning trade on Thursday.
    
The rupee hit the 57-level in the late morning trade after 11 months on persistent dollar demand from importers and banks. The domestic currency had touched a record low of 57.32 in late June last year.
    
Ahluwalia further said that the dollar is appreciating against all the currencies across the world and the rupee has not weakened as much as some of its peers. On his expectations on the CAD, which is slated to touch an all time high in FY13, Ahluwalia said it will surely be lower than 5 percent but may not touch the 4 percent level during the ongoing FY14.
    
When asked about the food security bill, Ahluwalia said the government will definitely make progress on the bill in whichever form and said he estimates the subsidy burden to be at a maximum of Rs 20,000 crore per year because of the law.
    
He said there was need to cut on subsidy on the fuel front and also made a case for diverting the subsidy given on fertilisers, which hurt soil fertility and water management. Ahluwalia said water management is not getting the due attention and added there is a need to have state level water regulatory authorities.
    
He said the ambitious tax reform GST may not come before the general elections next year and called for greater focus on the indirect taxation front which will help prop sagging growth.
    
Growth can touch up to 7.9 percent per annum over the 12th plan period if the right policy decisions are taken by the Government, but may slip to the 5.5 percent if there is a logjam on the policy making, he said. He said quite a bit of ground has been lost due to the decade-low growth of 5 percent in FY13, which Is the first year of the 12th plan.
    
Ahluwalia said one can expect greater steps to boost growth over the next two weeks, but declined to specify on the same.

(Agencies)

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