Rupee has recovered smartly to about right level: Chidambaram

The Indian rupee has recovered "smartly" against the US dollar and has stabilised around 61, which is "more or less correct exchange rate", Finance Minister P Chidambaram has said.

"Rupee has stabilised over the last four months. It weakened following the US hint of taper," Chidambaram told the Chinese state-run CCTV in an interview on the sidelines of the recent World Economic Forum in Davos, Switzerland.

"But then it recovered smartly from below Rs 68 to a dollar to around Rs 61-62. It has been stable between Rs 61-62, which we think is more or less the correct exchange rate," he said.

On Wednesday, the rupee closed higher by 10 paise or 0.16 per cent at 62.41 against the US dollar.

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Asked whether India is prepared for US Fed's tapering the economic stimulus package that was put in place to boost the American economy, Chidambaram said that when Washington hinted about tapering in May everybody was taken by surprise.

"But since then, they (US) nuanced their position and promised to consult emerging economies. Meanwhile, we have added to our foreign exchange reserves, we have liberalised rules of investment for FDI and FII.

"We have done number of capital market reforms. We think we are much better prepared to handle the consequences of a taper today than we were in May last year," he said.

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Chidambaram added: "We also think that US is not going to do the kind of sequential taper that was hinted in May. Perhaps it will do the taper in very different way. For example what they announced was one-ten billion step-down from $85 billion to $75 billion.

"It is not a sequential taper but we will have to wait and see what US will do after 1st February."

Speaking on poverty alleviation in India, Chidambaram sharply questioned the reported figures of the World Bank stating that 70 per cent Indians lived under $2 per day.

"That is not the correct figure. You can set the bar where you like. We think that about 32 per cent of Indians live below the poverty line. We have lifted 140 million people above the poverty line in the last few years," he said.

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Chidambaram added: "The rate of poverty reduction is 1.5 per cent a year over the last five years. China has nearly lifted above 500 people above the poverty line. India has lifted about 150 million people above the poverty line. These are not insignificant achievements.

"As growth picks up, wages and infrastructure rolled out, more people will be lifted above poverty line every year. If the rate of poverty (reduction) is about 1.5 per cent a year and improves to about 2 per cent, we can see significant reduction in poverty in India."