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“This year, by all estimates, it [growth rate] will be six per cent or slightly above. This is not a satisfactory level of growth,” said Finance Minister P Chidambaram.
The minister said the growth downturn in developed economies has affected India’s growth figures and that the rupee’s value will be determined by the market.
Monday’s measures by the Reserve Bank of India (RBI) are not related to the upcoming monetary policy review and should not impact the interest rates of banks, said Chidambaram.
“These measures [RBI decisions] should not be read as prelude to any policy rate changes. This has nothing to do with upcoming policy review of RBI… I don’t expect banks to increase interest rates as a result of yesterday’s measures,” the minister said at a press conference in Jaipur.
The RBI on Monday night announced a number of measures including raising the cost of borrowing by banks by two per cent.
It will also sell bonds worth hundreds of millions of rupees through open market operations to suck liquidity and check the rupee’s fall.
Chidambaram said the government was consulted by the RBI on the measures and “both are on board”.
The Indian rupee touched a lifetime low of 61.21 to a dollar earlier this month.
The value of the currency will depend upon “how much foreign exchange we earn and how much foreign exchange we spend” said the minister.
“We know that in forex market sometimes there is excessive speculation. Excessive speculation leads to volatility in market. So what any central bank or RBI and government can do or should do is ensure that volatility is reduced…and there is not too much speculation in forex market,” said Chidambaram.
The RBI is scheduled to announce its first quarter monetary review on July 30.
The finance minister also asked citizens to reduce their consumption of gold, although he ruled out a ban on imports.
Gold imports are costing India $50 billion in foreign exchange.