India got vital support from Japan on Friday in bolstering the sagging rupee with a three-fold increase in their bilateral currency swap arrangement from $15 billion to $50-billion.
Effectively, it means that India can borrow from Japan as a first call should it need some hard currency to bolster the rupee, which India believes is undervalued at current levels.
Economic affairs secretary Arvind Mayaram told reporters that the Japanese currency facility was not needed, but would help in stabilising the rupee. “We will never use it. We are fully equipped but for the purposes of shoring up sentiments it is a good arrangement,” he said here. India has $275 billlion in foreign exchange reserves.
The announcement came after Prime Minister Manmohan Singh met Japanese deputy prime minister and finance minister Taro Aso on the margins of the G20 summit of leaders of top global economies.
“The two governments expect that this will contribute to the stability of global financial markets including emerging economies,” the government said in a statement after the meeting.
The statement said the governments stressed the importance of continued reforms in financial sector and investment policies to help long-term capital inflows into India.