PM plays reforms card, says efforts on to save Rupee

Written by fe Bureau | New Delhi | Updated: Aug 31 2013, 10:15am hrs
The rupee slide and the rise in dollar prices of petroleum products will lead to some further upward pressure on prices and so, the RBI will continue to focus on bringing down inflation, Prime Minister Manmohan Singh said on Friday.

Singh, however, promised more measures to stabilise the rupee and bolster the fundamentals of the economy, which could range from cutting down subsidies and taking steps to boost exports to bringing more reforms that would attract capital inflows.

In his statement in the Lok Sabha, Singh sounded optimistic about a likely pick up in economic growth in the coming quarters on account of good monsoon and faster project clearances.

Singh's promise of further reforms comes in the wake of economic data showing GDP growth in the April-June quarter of this fiscal slipping to 4.4%, the slowest pace in at least four years.

Singh attributed the weakness in rupee not only to global factors such as tensions over Syria and the prospect of US Federal Reserve tapering its policy of quantitative easing, but also India's large current account deficit and some other domestic factors.

Stating that some part of the depreciation was merely a needed adjustment, Singh pointed out that it was in some way also good for the economy for a resultant increase in export competitiveness.

The rupee has depreciated by 20%against the US dollar since the beginning of May 2013.

He promised steps to reduce the country's appetite for gold and to economise the use of petroleum products and enhance exports.

We intend to act to reduce the current account deficit and bring about an improvement in the functioning of our economy, he said, adding the current account deficit this fiscal will be kept below $70 billion and at 2.5% of GDP in the medium term.

We will make every effort to maintain a macro economic framework friendly to foreign capital inflows to enable orderly financing of the current account deficit, he said and denied any intention to adopt capital control measures.

Raising foreign ownership limits in pension and insurance sectors, cutting down red tape and implementing the proposed Goods and Service Tax (GST) are also high on the agenda.

The most growth-friendly way to contain the deficit is to spend carefully, especially on subsidies that do not reach the poor, and we will take effective steps to that end, he said.

While we have taken a number of actions to strengthen those fundamentals (of the economy), we intend to do more, he promised.