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Indian gov't vows steps to check rupee slide
Publication Date : 25-06-2012
The Indian government will take measures to check the fall in rupee value, Finance Minister Pranab Mukherjee said yesterday. "We will take some corrective steps," he said outside his residence here in south Kolkata prior to his departure for Delhi.
On his yesterday's comment on measures to improve the depressed market condition, he said: "I have spoken to the Reserve Bank of India (RBI) Governor and finance secretary. Certain corrective measures should be taken and the RBI is looking into it." Mukherjee had also expressed concern over inflationary pressures.
In New Delhi, Mukherjee said: "The steps we have taken...And we will be able to take certain measures to be announced on Monday which will improve the market condition."
As regards signs of weakness in the economy, the finance minister said: "I would like to say GDP (growth) is at 6.5 per cent. There is inflationary pressure on economy, there is depreciation of rupee. These are, no doubt, signs of weakness in Indian economy ...I am concerned but I am not depressed".
The steps to be announced tomorrow by the government and the Reserve Bank of India may include raising the interest for Non-Resident Indians deposits, cutting down wasteful expenditures and unveiling a bond issue for overseas investors to improve capital inflows in the wake of the rout in rupee.
"Private investment in India is constrained by lack of availability of funds. The government might announce some measures for attracting investments and also steps to cut down wasteful expenditures," said YK Alagh, chairman, Institute of Rural Management.
Hit by a weak global sentiment and subdued local macroeconomic performance, the rupee has lost over 25 per cent in the last one year. It also breached the 57 level against the dollar on June 22.
Market analysts expect the RBI to announce an increase in interest rates for deposits of non-resident Indians. They also expect the government to announce a bond issue to attract inflows. "The RBI may increase the interest rate on Foreign Currency Non-resident Bank Deposits deposit further and announce the issuance of bonds for non-resident Indians to address the issues in the short term" Crisil chief economist DK Joshi said.
Experts also see steps being taken to reduce the twin deficits. CNI research head Kishor Ostwal said: "It might take steps to tame fiscal and current account deficits".