Weak rupee will be short-lived, India is strong: FinMin

London: The rupee’s recent weakness against the dollar will likely be short-lived as it is due to global factors and India’s economy remains strong, the country’s top finance ministry official said on Friday.

“The fact remains that we are not insulated, whatever happens in euro zone affects us too. In the last few days, foreign institutional investors have been withdrawing and that’s having an effect on the rupee,” R Gopalan, Secretary, Department of Economic Affairs at the Ministry of Finance, told reporters in London.

“Inherently we are strong. But short-term issues do have a bearing,” he added, speaking at the sidelines of a conference on infrastructure investment.

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The partially convertible rupee fell earlier this week to record lows against the dollar, as the euro zone crisis has focused attention on India’s widening trade deficit and big oil import bills. That has raised fears for inflation and investment flows as well.

Gopalan said the clearance this week for higher foreign investment into multi-brand retail would help ease inflation.

“All we can do is to structurally induce investors to have confidence in the economy,” he said.

Late on Thursday, the government approved 51-percent foreign direct investment in the supermarket sector.

“Stickiness in inflation is due to food inflation and (FDI in) multi-brand retail is one of the vehicles via which this can be contained,” Gopalan said.

Reuters