NITI Aayog vice-chairman Rajiv Kumar on Monday said that government doesn't identify a strong rupee with a strong economy

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"Rupee is coming down towards its natural level without much volatility and without any fear of a free-fall, which we had in 2013," Kumar said to CNBC-TV18.

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Not worried about current depreciation in rupee, says NITI Aayog's Rajiv Kumar

Kumar said government is taking steps to increase the flow of capital into the country, so that it can finance the deficit.

Edited excerpts:

Q: Let me start with the problem because they are more interesting; the rupee depreciation. Personally of course most countries welcome depreciation of their currency because that is healthy for the economy, imports become expensive. Is there any spot of worry at all? You are happy that it is depreciated in the way in which it has?

A: Yes, because rupee has not been very volatile and I am not worried if it finds its natural level and it had been over-appreciated in the past. So, it's coming down towards its natural level without much volatility and without any fear of a free-fall, which we had in 2013. I think that is the critical one. So, as long as it’s a regular managed move, I am not worried a bit.

In fact, I am very much against this notion that a strong rupee means a strong country or a strong economy. I think they are just completely outdated. The sooner all of us get out of that mental frame, the better we would be.

Q: You are a kind of economic teacher in the government. Is the government behind this view that we should not identify a strong rupee with a strong economy? Is that fairly well understood?

A: I think so. I think the government is very clear in its mind that a rupee, which is closer to its natural value, will encourage and help exports, will discourage imports, will improve our trade balance and prevent an external account distress coming our way and this is the best way to capture our inefficiencies in the infrastructure or transaction cost etc. The government is very much behind it.

Q: Coming to the problem, which the rupee should address which is the current account or the trade deficit. We have seen a rise in trade deficit and July trade deficit, which came few days back at 18.02 billion, was little scary besides being calling it a 62 month high. If you pro rata go with 18 billion, then we are ending up with over three percent current account deficit. How is the government addressing that?

A: First thing is that it doesn’t permit any complacency. However, one way of addressing is to clampdown on the economy and in some sense tighten everything and bring down the rate of growth is perhaps also not acceptable – that could have been done, but I think it’s not yet time for that. So, we are not in that kind of crisis to hike all rates and cut expenditure and contract economic activity. I think that is not yet called for. Therefore, what is the other alternative, because imports will rise if economic activity increases, so the only way and which is where the government is very sharply focused on especially department of commerce is on raising exports both goods and services and services exports are beginning to see a newer momentum despite what has happened in the US. So that is the place to have a sharper focus to the exclusion of everything else. Second part is to improve capital flows so that you can finance the deficit that you have. We have got about 70 billion and we can ramp up that even more and hopefully more equity than debt flows.