India needs to have a calibrated approach for rupee convertibility, Reserve Bank of India (RBI) governor Duvvuri Subbarao said in Mumbai on Monday. The governor was speaking on the occasion of the Release of Developments of India Report organised by IGIDR (Indira Gandhi Institute of Development Research).
Subbarao observed that the country must maintain a sustainable current account gap and added that India needs a market determined exchange rate. The governor also observed that the country must have enough of a foreign exchange buffer against uncertainties.
India?s current account deficit in the January-March period was lower than expected at 1.1% of GDP, well below the 2.1% of GDP in the previous quarter. Deficit number fell sharply to 45.4 billion from $10 billion in the previous quarter. India?s foreign exchange reserves increased by $6.695 billion to $315.715billion for the week ending on July 1. According to the Economic Survey, the forex reserves had reached $314.6 billion at May-end 2008. Foreign currency assets, a major component of the forex pool, also increased to $283.458 billion, up $6.365 billion for the week ended July 1, according to RBI data.
Subbarao said the nation can?t depend on services industry alone to drive growth and the farm sector should expand at 4% to drive economic growth. He also said there was a need to focus on manufacturing to add jobs and said farm productivity should grow at 4%.