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The government is not short of options to tackle the fall of the rupee and will take actions as necessary, the top adviser in the finance ministry told reporters on Thursday, after the rupee fell to a record low.
Raghuram Rajan also said the central bank would take action to support the rupee as appropriate.
The rupee fell a day after US Federal Reserve Chairman Ben Bernanke confirmed the Fed would begin winding down its stimulus spending later this year, and data showed China's factory activity weakened to a nine-month low in June.
He said that markets are overshooting as they tend to do at these times.
Rajan said that few emerging markets have better prospects and said that over time capital inflows will favour India. He added that there is a need to focus on medium term and get fundamentals in order. Current account deficit, he said, is large but we are on our way to trimming it. Gold imports have also come off its peak, he said.
