The Indian economy is going through a “difficult period” and is likely to grow slower than previously expected 6.5 percent for the year ending March 2014, Prime Minister Manmohan Singh said on Friday.
Singh, speaking at an industry event, said the UPA government would unveil more reforms for foreign direct investment (FDI), but he gave no details.
“We are committed to bringing the current account deficit under control by addressing the demand side and supply side of the problem. On the demand side we need to reduce the demand for gold and the demand for petroleum products, the two biggest components of our trade deficit,” he told businessmen in New Delhi.
Singh says the most immediate cause of worry remains the volatility in the foreign exchange market. The Reserve Bank of India (RBI) has been on a mission to rescue the domestic currency, unveiling a slew of measures to pacify the currency.
However, Singh feels the RBI measures do not in any way signal increase in interest rate in the long-term. “The central bank can consider reversal once the rupee stabilises,” he says.
Earlier in the week, finance Minister P Chidambaram said India will “fully and safely” fund its current account deficit this fiscal year without depleting its forex reserves.
The deficit hit 4.8 percent of GDP in the previous fiscal year that ended in March.
Chidambaram said he was confident of keeping the current account gap below last year’s levels with some stern steps.
Singh expects the CAD in 2013-14 to be lower than 4.7 percent recorded in the previous fiscal. “The impact of the initiatives taken by the government will be felt in the second half of the current fiscal,” he says.