The rupee on 16 August had slumped to a lifetime low of 70.32 on strong demand for the US dollar. The rupee today staged a good recovery to end higher by 20 paise at 69.91 against the US currency on bouts of dollar selling by exporters and corporates.
“Well just to be fair, the Indian authorities have brought down the fiscal deficit. What has expanded is the current account deficit. A lot of it driven by higher oil prices,” he said.
“The rupee has not depreciated to too worrying levels, its sort dollar strength around the world,” Rajan told a TV channel.
Rajan, who was RBI governor for three years till September 2016, said further that this is a time where countries should be focusing on getting the macro stability in order.
“Going into an election year, countries like India and Brazil should try their level best to look as good as possible,” he said.
On the controversy over back series GDP data which showed that the growth was better during UPA regime, Rajan said: “What we have to do right now is to look forward… it’s growing at about 7.5%.”
India, he added, has to make sure that CAD does not grow out and fiscal stability is maintained.
Replying to a query on rising bad loans, Rajan said there is a need to improve governance in the banks.
“My sense is that whichever new administration comes this will be task number one for them,” Rajan, who is currently the Katherine Dusak Miller Distinguished Service Professor of Finance at Chicago Booth School of Business said.
India’s trade deficit soared to a nearly five-year high of $18 billion in July, raising concerns on the current account front.
Recently, a top finance ministry official said that the government will meet the fiscal deficit target for the current fiscal but is also expecting some slippage in the CAD on higher crude oil prices.