US Fed Reserve comments hurt rupee- India PM
August 30, 2013, 7:12 am

The Indian prime minister assured the Indian Parliament that the fundamentals of the Indian economy are still strong [AP]

“I would like to assure the house and the world that the government is not contemplating any measures for capital controls,” said Singh.

India’s forex reserves stand at $278 billion and the fundamentals of the Indian economy are strong, assured the prime minister.

Singh urged on Friday that India needs to “reduce our appetite for gold, economise the use of petroleum products and take steps to increase our exports”.

Singh said external factors like the escalating crisis in Syria and the prospect of a much-feared tapering of a $85 billion fiscal stimulus programme by the US Federal Reserve weighed heavily on the Indian rupee, causing it to depreciate heavily.

The Indian rupee has depreciated about 18 per cent against the dollar in the past six months.

The rupee trimmed its early losses but was still quoted down by 32 paise to 66.87 against the dollar in late morning trade on Friday on month-end demand for the US currency from banks and importers.

Singh said on Friday that the government “will do whatever is necessary” to contain the fiscal deficit to 4.8 per cent in 2013.

The economist Indian prime minister also said that to some extent, “depreciation can be good for the economy as this will help to increase our export competitiveness and discourage imports”.

Meanwhile, on Thursday, India’s Commerce and Industry Ministry constituted a task force to work out currency swap arrangements with key trading partners.

In a bid to provide stability to the falling rupee, and stem the rising trade deficit, the need for a currency swap arrangement was felt, said an official ministry statement.

The BRICS Post