• MEA spokesperson Raveesh Kumar sought to put the speculation to rest by stating that every time a fresh passport was issued to Modi, his previous passport was “physically” cancelled
• Official sources here said that there’s not much the ministry can do until the agencies are able to establish Modi’s precise location

NEW DELHI: The external affairs ministry broke its silence on Thursday over the issue of Nirav Modi saying that at no stage did the fugitive scamster hold more than one valid passport.

While it has been widely reported that Modi held 6 passports, MEA spokesperson Ravees Kumar sought to put the speculation to rest by stating that every time a fresh passport was issued to Modi, his previous passport was “physically” cancelled.

TOI had first reported on Wednesday that MEA had written to select European countries asking them to help India trace Modi and that the diamond trader held only one valid passport at a time.

Apart from the point about the passport, Kumar made the following 3 points in an official briefing. First, all Indian missions were informed about the revocation of Modi’s passport in February and that the Indian envoys conveyed the same to the respective countries they were serving in.

Second, a fresh communication has now been sent to a select group of countries, asking them to help locate Modi and deny him entry into their territory. “We have asked them to inform us if they find him living in their country,” said Kumar.

Third, the foreign ministry has so far not received any extradition request for Modi from the agencies involved in investigating the financial fraud case against Modi.

While a Mumbai court this week was reported to have allowed ED to initiate extradition proceedings, the investigating agency has not yet approached MEA for the same. The fact that MEA has written to several countries including Belgium, France and UK suggests that the government is not yet sure about Modi’s exact location.

The ministry was compelled to go public with its position after reports emerged, mostly attributed to anonymous sources in investigating agencies, suggesting that MEA had not taken enough follow-up action to strengthen CBI’s attempts to track Modi down.

Official sources here said that there’s not much the ministry can do until the agencies are able to establish Modi’s precise location. The Interpol is yet to issue a Red Corner Notice (RCN) for Modi as it apparently believes that all legal formalities for the same have not yet been completed.

The “diffusion” notice from Interpol, according to senior government sources, is not enough to get western European countries like Belgium, France or UK to detain him.

A “diffusion” is less formal than an RCN and clearly not taken as seriously as the latter. While Interpol “publishes” RCN and also alerts cops all over the world about it, Diffusion is circulated directly by the Interpol nodal agency in a member country to any other member country of its choice or to “the entire Interpol membership” . For Interpol to issue RCN, it’s important that all legal requirements are met.

A question raised today, now that the rupee has crossed the 69 level, is as to where can it go? The answer is that no one really knows, as there have been too many things happening that go beyond the realm of fundamentals. Normally when the rupee falls at a rapid pace, it is conjectured that it would continue to fall and new psychological levels are accordingly fixed.

Touching 69 invariably has the market talking of 70. This is because we tend to make what in economics is called ‘adaptive expectations’. But as has been seen in the past, the Reserve Bank of India (RBI) can make a big difference in terms of intervening in the market, which then changes things quite appreciably and often there can be a reversal in direction.

Why has the rupee fallen? There are two standard sets of reasons for the same with each one reinforcing the other. These are witnessed even today. The market sentiment actually drives the rupee on a daily basis. Here the causes have strengthened this week.

First, the trade war between the US and China seems to be escalating in terms of decibels though the exact tariffs and restrictive procedures are less severe. But this is good to spook the market. Second, the recent decision of the OPEC to increase output has been interpreted as being a damp squib as the amount is too low to make a difference. The market now realises that what has been proposed touches the periphery and not the core. Therefore, Brent is back to the happy hunting days of $77-78 a barrel.

Third, US sanctions on Iran are escalating. As India imports oil from Iran, the panic is palpable even though closure of this market will bring about substitution with other countries. But the fact that a part of such imports is in oil is good enough to keep the market jittery.

In such a situation, the fundamentals also get supportive. Exporters would prefer to hold back their dollar earnings hoping to reap a higher conversion rate that lowers the supply of dollars. Importers will rush for purchases of dollars – especially the oil companies, which in turn will add to demand for forex. This makes the fundamentals weaker, which support further deprecation. This is the usual story of the decline of the rupee which is being played out again.

The RBI has to step in now and send signals. Otherwise the assumption will be that a weaker rupee is acceptable as it provides a boost to exports. But beyond a limit, the inflation consequences are scary. Inflation is already moving up and a weaker rupee combined with a trade deficit means that imported inflation increases further. While one cannot predict food prices, the non-food component has been rising in the last 12 months and this can be the proverbial last straw. Therefore, there has to be some control over the depreciation. This is something which the RBI has to decide and it would have to assess the component of the depreciation which is not related to the fundamentals that are weakening.

The external account has been a strong point for us in the last three years mainly owing to the oil factor and relative peaceful geo-political relations. The advent of Donald Trump and other developments has made the global economic situation more volatile and the equations have changed. That is why the currency will cease to be stable, and forex reserves that were assiduously built up will now become a war chest where withdrawals can be expected to maintain stability in the market.