Millennium Post

Pranab looks worldwide for slowdown excuse

The government on Tuesday said the global slowdown due to the eurozone crisis has impacted the Indian economy and steps are being taken to tackle the situation. 'Global slowdown due to unfolding of eurozone sovereign debt crisis has, inter-alia, impacted the Indian economy through deceleration in exports, widening of trade and current account deficit, decline in capital flows, fall in the value of Indian Rupee, stock market decline and lower economic growth,’ finance minister Pranab Mukherjee said in a written reply to the Rajya Sabha.

Export oriented industries and the capital investment are the most affected sectors, he said.

Mukherjee said the government is taking a number of steps to arrest the decline of rupee, which breached the psychological 55-level on Monday. A number of steps have been taken to augment the supply of foreign exchange to stem rupee decline, he said adding measures have also been taken to increase direct foreign investment for infrastructural development.

He said the steps included liberalisation of external commercial borrowings (ECB) policy and portfolio investment norms besides steps to improve access to corporate bond market through Infrastructure Debt Funds. The RBI has also taken initiatives to curb speculation in the foreign exchange market, he said.

This included raising of NRI deposit interest rates, easing availability of export credit and stipulation that 50 per cent of balances in the Exchange Earner’s Foreign Currency Account be converted into rupees balances, he said. 'A number of legislative measures/amendments have also been taken for fiscal consolidation/reforms and financial sector reforms,’ Mukherjee said.


With rupee falling to record low against dollar, finance minister Pranab Mukherjee said the government is taking steps to arrest volatility in the foreign exchange market and the Reserve Bank of India (RBI) will intervene when necessary.

‘The government is taking a series of steps. However, managing rupee is market-related... There is a lot of volatility,’ he said. The rupee slid to a fresh low of Rs 55.32 against the US dollar to close at 55.39.

‘As and when RBI will consider necessary they will intervene. It depends on the market forces and market forces are uncertain,’ Mukherjee said.

The rupee has lost over 22 per cent since the beginning of the year. Global risk aversion is putting pressure on the domestic currency as foreign funds are pulling out money. Besides, a widening current account deficit and concerns of investment in India is also putting pressure on the rupee. RBI has taken a slew of policy steps to increase dollar flows, including relaxing interest rates caps on non-resident deposits and asking exporters to convert half of their foreign currency earnings into rupee.
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