Rupee depreciation due to external factors: PM

Prime Minister Manmohan Singh on Friday said that the rupee’s share depreciation was a matter of concern and that the sharp dip in the rupee was due to certain unexpected external factors. He added that the U.S. federal reserves tapering has caused general weakening in global currencies. The Prime Minister also said that India needs to reduce its appetite for gold and economise use of petroleum products. The government is confident of lowering current account deficit to $70 billion this fiscal, he said.

Part of rupee depreciation needed adjustment as inflation in India was much higher than advanced countries. He added that the RBI and government have taken number of steps to stabilise rupee and that the government was not contemplating capital controls. Sudden decline in exchange rate is certainly a shock which will be addressed by other measures not by resorting to capital controls or reversing reforms, Mr. Singh said.

With respect to the GDP Mr. Singh said that the growth in first quarter of 2013-14 is likely to remain flat and the government will do whatever is necessary to contain fiscal deficit at 4.8 p.c. of GDP. However, growth will pick up in the second half of the current fiscal, he added.

Depreciation of rupee and rise in oil prices will put further upward pressure on inflation. But the fundamentals of Indian economy continue to be strong, Mr. Singh said. On the foreign exchange reserves Mr. Singh said that the reserves were at $278 bn, more than sufficient to meet requirements.