Rupee slide a concern, but no capital controls: PM
Prime Minister Manmohan Singh Friday said while the sharp slide in the value of the rupee caused by external developments was a matter of concern, there was no question of capital controls and India would remain an open economy.
"The depreciation in the value of the rupee since end of May is a matter of concern," the prime minister told the Lok Sabha. "What triggered the sharp depreciation in rupee was the market's reaction to unexpected external developments," he added.
"Clearly, we need to reduce our appetite for gold, economise the use of petroleum products and take steps to increase our exports," he said. At the same time, the fall in rupee's value is good to some extent as it makes exports competitive, he added.
The prime minister also assured that the country's growth which has slipped will pick up soon, and everything would be done to contain the fiscal deficit at 4.8 percent of the gross domestic product (GDP).
The Indian rupee has lost almost 20 percent against the US dollar this fiscal, largely due to pull-out by foreign funds from the Indian markets after the US central bank hinted that it would lower fiscal stimulus as the economy shows sign of recovery.
The rupee fell nearly 4 percent to hit a record low of 68.85 per dollar Wednesday, the biggest single-day percentage loss since October 1995. But the currency recovered and surged 3.5 percent to close at 66.55 against a dollar a day later.
The prime minister, who had made a brief statement on the economic situation Thursday as well, also sought to lift market sentiments Friday with assurances on reforms.
"Last two decades have seen India grow as an open economy and benefited from it. There is no question of reversing these policies," he said. "I would like to assure the house and the world the government is not contemplating any measures on capital controls."
The prime minister said the fundamentals of the Indian economy had continued to remain strong and that both the central bank and the government were taking steps to contain inflation. He said efforts were also underway to contain the current account deficit.
"Growth-friendly way to contain the deficit is to spend carefully, especially on subsidies that do not reach the poor. We will take steps," the prime minister said, while also seeking the support of political parties to pursue good policies.
"The easy reforms of the past have been done. For more difficult reforms, we need political consensus. I urge across political parties to work towards and join in the government's efforts to put the economy back on the path of stable growth."