Excessively strong rupee is undesirable: Raghuram Rajan

In a chat with ET Now, Raghuram Rajan, governor, RBI, shares his views on the rupee and the economy. Excerpts:

ET Now: Today’s policy statement says that a strong rupee is undesirable. Are we targeting a rupee level which creates a deflationary impulse? Are we trying to take the same path as other countries to ensure a competitive depreciation of the rupee?

Raghuram Rajan: No, we are not doing that. I said that an excessively strong rupee is undesirable. I think it will be very hard for anybody to disagree with this statement.

'Undesirable' does not mean that we will necessarily act against it if such a situation were to arise. I believe that what we can do is perhaps act against temporary undesirable volatility. But it is very hard for us to act on a sustained basis to maintain the value of the rupee.

Therefore, we have said time and again that our intervention is aimed at reducing avoidable volatility. Our intervention is never really targeted at creating or maintaining a desired value for the rupee.

If the rupee attains a value that is undesirable, then we can do a whole lot against that level, if that is what the market in its full wisdom wants.