With the rupee sliding below the 63 mark against US dollar, World Bank Chief Economist Kaushik Basu today said the country should use forex reserves to curb volatility in the currency market and not to look to IMF for funds.
"To use certain amount of your forex to buy and sell dollar I think (is) a good idea...(It) gives out signal that reserve has a purpose. That is broadly the direction we should go and use reserves to curb turbulence", he said while delivering the 16th JRD Tata Memorial Lecture here.
Basu, who was Chief Economic Adviser in the Finance Ministry before taking over his assignment with the World Bank, said the government should not "overreact" to depreciation of rupee.
Continuing its free fall, the rupee today breached 63-mark a dollar to end at all time low of 63.13, recording the decade's worst single-day fall of 148 paise, heightening fears that more capital control steps could be in the offing.
"There was a sudden depreciation in exchange rate but we must not overreact to that. We do need steps to correct it. The certain amount of buying and selling of foreign exchange is the technique that is done in floating exchange rate market...That method could be strategic intervention," he said.
On the possibility of India approaching the International Monetary Fund (IMF) for money, Basu said: "I don't think we are in a situation where there is any need for that. India has enough foreign exchange reserve. So, the question of having to turn to IMF is not there."
India has a foreign exchange reserve of about USD 280 billion.
