By ABHRAJIT GANGOPADHYAY NEW DELHI – The Indian rupee can't be pegged to a definite value against the U.S. dollar and its recent weakness doesn't signal any fundamental economic shift, but mirrors a global strengthening of the greenback, an executive director at the International Monetary Fund said. "It would be foolhardy to say that such and such is the right value of the rupee, no matter what is happening in the globe and in the Indian economy," Arvind Virmani said. The partly convertible Indian rupee has weakened nearly 10% against the U.S. dollar since the start of the fiscal year on April 1 -- one of worst performing Asian currencies -- but the Reserve Bank of India hasn't intervened much to stem the local unit's steady slide. "I am fully in agreement with the declared RBI policy to only intervene to dampen excessive volatility in the rupee-dollar exchange rate, while leaving it free to adjust to any changes in its underlying trend or cycles due to basic changes in economic factors," Mr. Virmani said. A weak rupee adds to the prolonged inflationary pressure in Asia's third-largest economy, which imports nearly 80% of its oil requirements and pays mostly in U.S. dollars. Inflation has remained the top concern for the central bank, which has raised the key policy rate a dozen times over past 18 months. Economists largely blame supply bottlenecks for driving India's stubborn inflation, and high global commodity prices offer little hope of price pressures easing sharply anytime soon. "Monetary policy also has to take account of demand-side pressures arising from fiscal deficit," Mr. Virmani said. India aims to limit its fiscal deficit to 4.6% of gross domestic product this fiscal year, but analysts widely expect the government to miss the target as revenue growth stutters amid a slowing economy and as subsidy payouts mount. Last week, the government raised its full-year borrowing target by 528 billion rupees ($10.8 billion), but maintained it would stick to the budget gap aim -- a claim most analysts don't agree with. "It is essential to put the fiscal deficit on clear and unambiguous downward trajectory if India wants to sustain growth in the 8.5%-9% range for the next two decades," Mr. Virmani said. India's economy is estimated to grow at 8.2% this fiscal year, slowing from an 8.5% expansion last year. Write to Abhrajit Gangopadhyay at Abhrajit.gangopadhyay@dowjones.com

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