Finance Minister P. Chidambaram Thursday called for calm in the currency markets saying stability will soon return, as the rupee slipped below the psychological level of 65 against the dollar.
"There is no cause of panic...We are confident that stability will return to the markets," Chidambaram said at a media conference here.
The finance minister said volatility in the currency market was unacceptable and the government was taking measures to improve the situation.
Chidambaram said rupee was undervalued and had overshot its reasonable limit. However, he said the government was not targeting any particular exchange rate for rupee.
"We are not targeting any particular level for the currency. We want a stable currency...rupee today is undervalued and has overshot."
The partially-convertible rupee slumped to a new record low of 65.56 against a dollar at the inter-bank foreign exchange market in Mumbai, surpassing its previous record low of 64.54 touched Wednesday.
The currency recovered in the late trading and ended the day at 64.55 against a dollar, 44 paise weaker than its previous day's close at 64.11.
Chidambaram said global factors were impacting the Indian markets. "All emerging markets have been impacted by forex volatility".
Referring to the recent measures announced by the central bank and the government to curb the rupee slide, the finance minister said the government had no intention of introducing capital controls and the policy would be reversed once the stability returns to the market.
Chidambaram said the government was confident of keeping the current account deficit below $70 billion in the current financial year and the economic growth would pick up from the second quarter.
He said India's debt indicators were within prudent limit and the government was exploring structural measures to curb current account deficit (CAD).
"While growth is expected to be flat in Q1, it will to pick up on the back of recently cleared projects," said the finance minister, adding that a stronger growth would help alleviate many challenges facing the economy.
Reacting on the finance minister's statement, Federation of Indian Chambers of Commerce and Industry (FICCI) president Naina Lal Kidwai said the statement reiterating growth to be the key focus going ahead is indeed encouraging.
"We understand that there are multiple challenges at hand, with the greatest concern being the twin deficits. Also, the industrial growth is languishing and it will be important to get the optimism back amongst the investors," Kidwai said.
