Indian rupee volatility: No throw back to 1991 crisis, says PM Manmohan Singh

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PM Manmohan Singh was speaking after release of the fourth volume of RBI history titled PM Manmohan Singh was speaking after release of the fourth volume of RBI history titled "RBI History-Looking Back and Looking Ahead" at a small function at his Race Course residence. (AP)
Summary'During 1991 crisis foreign exchange in India was a fixed rate.'

Prime Minister Manmohan Singh today ruled out the possibility of India witnessing a repeat of the 1991 balance of payments crisis and also reversing the path to globalisation of the economy.

PM Manmohan Singh for new thinking on RBI's monetary policy

"There is no no question of going back to1991 (balance of payment crisis). At that time foreign exchange in India was a fixed rate. Now it is linked to market. We only correct the volatility of the rupee," he told PTI.

In 1991, Singh said, the country had only foreign exchange reserves for 15 days. "Now we have reserves of six to seven months. So there is no comparison. And no go question of going back to 1991 crisis."

Against the backdrop of the high Current Account Deficit (CAD) the Prime Minister was asked about fears in some quarters that the country may be witnessing a throw back to 1991 crisis when gold was pledged and the country was forced to adopt a reforms programme that put it on the path of globalisation of economy.

He was speaking after release of the fourth volume of RBI history titled "RBI History-Looking Back and Looking Ahead" at a small function at his Race Course residence.

When asked that the Current Account Deficit was still high, Singh acknowledged the problem saying high imports of gold was one of the major factors contributing to it.

"We seem to be investing a lot in unproductive assets," he added.

He then turned to a leading economic journalist and said, "Ask him. He is the guru."

High gold imports pushed CAD to a record high of 4.8 per cent of the GDP (USD 88.2 billion) in 2012-13 when India imported 845 tonnes of yellow metal. Import of gold in April-July 2013-14 it rose 87 per cent to 383 tonnes.

In order to curb import of gold and contain CAD to USD 70 billion, the government raised customs duty on precious metals like gold, silver and platinum to 10 per cent.

RBI also imposed restrictions on import of gold coins, medallions and dorebars saying importers would require licence from Directorate General of Foreign Trade (DGFT).

Widening CAD is putting pressure on Rupee and to check its free fall government has been taking a series of measures to increase the inflow of foreign exchange as well as check its outflow.

The RBI on Wednesday announced stern measures, including curbs on Indian firms investing abroad and on outward remittances by resident Indians.

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