Even as the rupee battled uncertainty and market nervousness, Jalan spoke to The Financial Express on how he viewed the situation. According to him, his job is not to set any specific target for the currency, but to ensure that the market operates on the basis of full information about the economy's fundamentals. Thus, transparency is the key to the RBI's exchange rate policy. Jalan is confident that the country's economic fundamentals are strong enough to withstand the crisis. Excerpts from the interview:

Q: What is your assessment of the measures announced by the RBI on Thursday?

A: The statement that we issuedon Thursday (along with measures to boost exports, etc) was to project the picture as we saw it. It has worked the way we expected it to work.

Q: Today the rupee has slipped further. Is it totally driven by speculation?

A: We need to analyse the turnover data. Today, the global market is in turmoil... The yen's movement is extraordinary. I don't want to make any comment on today's development. About the forex market, all I can say is that the movements have been quite orderly... But, purchases exceeded supply... that explains the phenomenon

Q: Should the RBI be in the market selling dollars to augment the supply?

A: I am not saying so. We will not enter if there is not much of speculative activities. The RBI will only enter when it has to enter...

Q: Do you intend to safeguard the intrinsic value of the rupee?

A: Naturally, this must always be so. But we don't have the target of a specific exchange rate. That's all. We are also not targeting a specific range.

Q: Are youhappy with the state of affairs in the forex market?

A: I am neither happy nor unhappy.

Q: What will happen if you stop reacting excessively to the market's nervousness? How about taking a vacation and letting the rupee find its own level?

A: That way every one can take a vacation. The government can take a vacation, we can take a vacation, newspapers can take a vacation... But we have some responsibility...given all the uncertainties around... Last week we put all the cards on the table.

Q: After disclosing all your cards, are you happy with the developments in the market?

A: Everyday something new is happening. We are closely monitoring the situation.

Q: How about going for a sharp depreciation instead of letting the rupee lose a few paise everyday?

A: I don't want to comment on any specific level of the rupee. We don't have a specific exchange rate in mind. The world has not found an easy and foolproof answer to tackle currency markets.

The best we can do is to betransparent and realistic and respond to the market situation as it develops. You have seen.. even the yen can fall... Japan is one of the strongest economies of the world and they have not found an answer. There must be some lack of economic knowledge somewhere.

Q: Is the government too concerned about the exchange rate?

A: Every country has to be concerned about what is happening on the external front. The exchange rate is a part of it. I think we have been following a realistic approach towards it.

Q: Despite your recent measures forward premiums are rising.

A: Forwards are going up because in the present circumstances we do not want banks doing arbitrage between the two markets. There is no problem in forwards going up... it is not an issue at all.

The problem is that there are a lot of uncertainties around us. This is the period of greatest uncertainty that I have seen in the Asian markets. It has now extended to Japan... the Asian crisis which was supposed to be contained a fewmonths ago now seems to be spreading again. It was bound to have some effects.... We need to keep our cool.. we will try to limit any spillover effects on the economic front. We can do it.

Q: Why are the FIIs so nervous about India?

A: I have not personally interacted with the FIIs... The market participants act on as they see the market. The best we can do is to put the real economic factors before them. What we can do is to provide them with the necessary facilities and support that they require. Beyond that we cannot do much... They will operate based on their market perceptions.

Q: Have the FIIs started taking forward cover?

A: It is too early to say. Today I am told the yen has lost substantially... The stock market is affected.

Q: You have stated that you will encourage private placements of government papers with the RBI. Won't that trigger higher monetisation and consequently a high level of inflation?

A: What we have said is that as far as possible, one of thepriorities is to have an interest rate structure which is investor-friendly. There are uncertainties around us. We decided to take some government papers in our books and gradually offload them in the market. It is a very limited statement. We did not say that we would encourage private placement as a matter of policy.

Q: The budget did not specify the exact target for monetisation in 1998-99. What is the level of monetisation you are aiming at?

A: I don't have a target. It will be our endeavour to try and sell those securities (which we take in our books) at the earliest depending on the market conditions. We don't want to have a high level of monetisation. The monsoon is expected to be good. If the real rate of growth in the economy is between 6.5 per cent and 7 per cent there is no reason why there should be high monetisation.

Q: You have offered refinance facility to banks against export credit at 4 per cent. Is this a kind of backdoor CRR cut?

A This refinance facility isspecifically targeted at export credits. You cannot say it is a kind of CRR cut. There is no tradeoff between the two. We are willing to cut CRR if there is any liquidity problem. As of now there is no liquidity problem. The present move (of offering refinance at 4 per cent for export credit) is directed towards meeting a requirement for a limited period of time.

Q: In retrospect, do you think that we had underestimated the impact of sanctions?

A: No. We have correctly assessed the impact of sanctions. And there is no change in it.

Q: What is your comment on the G-8 nations' clampdown on all non-humanitarian aid to India?

A: Let us watch and see.