MUMBAI/NEW DELHI, AUG 24: Indian industry has generally welcomed the fall of the rupee against the US dollar saying it would boost exports and bolster the economy.

"The correction CII believes would set right the value of the rupee as it was overvalued to the extent of 10-14 per cent," the Confederation of Indian Industry (CII) said in a statement.

The rupee fell to Rs 36.14 per US $ on Wednesday, hitting an 18-month low after a newspaper reported that the government was considering setting up a band within which the rupee could be freely traded against the US currency. he report led to panic covering by banks.

The rupee slipped by over one per cent before closing on Wednesday at 35.95/98, largely on a RBI statement that the report was misleading.The Reserve Bank of India (RBI) sold dollars on Friday for the first time for over a year after the rupee fell sharply against the US currency, touching 36.50.

The Federation of Indian Chambers of Commerce and Industry (FICCI) said the adjustment of the rupee against the dollar was a "natural process" and "not an aberration to be scared of".

"This technical correction of the rupee is widely perceived to be a blessing in disguise since for a long time the view of the exporters and foreign exchange dealers was that the rupee was overvalued to the extent of 14 per cent or so," the FICCI said in a statement.

FICCI president A S Kasliwal said with the rupee currently pegged at Rs 36.50 augured well for the exporters who had bitterly complained against a stronger rupee affecting their competitiveness.

"At this new level, CII believes, exporters would be incentivised and stimulated. The economy would also get a boost and hopefully receive a kick start," the confederation said.

Kasliwal said Indian need not have to worry about any distortions in foreign exchange stability as inflation was ruling low and foreign exchange reserves including SDRs were currently at $28 billion. India's year-on-year inflation rate measured by the wholesale price index stood at 4.05 per cent in the week ended August 2 compared with 4.02 percent in the previous week.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.