Chidambaram allays fear of falling rupee,promises more reforms

* Reforms on coal & gas pricing,FDI limit,simple norms for foreign investors on works

Written by ENS Economic Bureau | New Delhi | Published: June 14, 2013 1:16:02 am

In the season of cricket,finance minister P Chidambaram on Thursday said that economic reforms can not be equated with one-day matches where runs are scored or wickets taken on every other ball.

“We have to take a long-term view. Significant results have taken place and we are looking at more reforms,” he said,promising more decisions by the month-end.

Trying to shore up investor sentiments over the falling rupee and the burgeoning current account deficit,the finance minister assured that there was no reason to panic and promised that policy makers would take steps to prevent volatility in the forex market.

“I don’t think we need to panic about what is happening in rupee. Yes,it does put pressure on inflation,it puts pressure on subsidy bill,specially on imported commodities,” he said,adding that the rupee is likely to recover its recent losses.

Pointing out that the depreciating currency is not an India-specific problem,Chidambaram said all countries such as Brazil,Chile and Turkey,which have high CAD have registered a hit on their currencies.

But his comments did little to allay fears on the rupee,which closed 19 paise down at 57.98 against the US dollar. The Sensex also fell 1.12 per cent to end at 18,827.16.

Analysts said investors were hoping for some immediate announcements rather than a long-term view.

“The currency markets were expecting some concrete measures to stem the rupee’s depreciation. So to that extent the speech was disappointing and created the impression that the government is not worried about the currency fall,” said Samiran Chakraborty,Regional Head of Research,India,Standard Chartered Bank,adding that on a larger level the minister reiterated the government’s commitment to reforms.

Chidambaram who was addressing a specially called press conference,a day after Fitch ratings upgraded its credit outlook on India from negative to stable also said the world keeps faith in India’s growth story.

“After nine months (since starting reforms in August 2012),there has been acknowledgement that the steps taken have delivered outcomes,especially on fiscal consolidation and inflation,” he said while referring to the Fitch upgrade.

Elaborating on planned reforms,he said,“Firstly on coal pricing and coal allocation to power plants. Secondly gas pricing. Thirdly on FDI limit and fourthly on a number of steps that Sebi is contemplating based on Chandrasekhar Committee report which was submitted yesterday.”

While announcing that he will request Prime Minister Manmohan Singh to ensure that these are taken by the month-end,he also promised that more reform measures in sectors such as crude oil,natural gas and fertilsiers would be taken by early July to ensure that they register positive growth this fiscal.

He,however,ruled out any further increase in duty on gold imports while parrying questions on NRI bonds to attract foreign investment.

Chidambaram also welcomed the recommendations of the Chandrasekhar committee and said Sebi board will take a view on it on June 25. “We think the Chandrasekhar committee report is extremely positive and they deserved to be accepted,of course,after discussion,” he said.

‘Don’t think there is any reason for panic on the depreciating rupee’

“Gold imports have sharply come down but I would be happy if they come down even further.”

Net gold imports averaged $135 mn till May 20 but in the next 14 business days it averaged only $36 mn

“Real concern is performance of 3 core sectors — crude oil,natural gas and fertilisers.”

Sectors saw negative growth in 2012-13. Decisions to ensure positive growth by early July

“We are in favour of Chandrasekhar committee report. Recommendations are positive and deserve to be accepted.”

Sebi has called a board meeting on June 25 to discuss the report that aims to enhance capital flows.

“We are determined to push through LPG with DBT.”

Launched on June 1,all-India roll out by year end. Will

benefit 12 crore families.

“Coal India Ltd is on the list of companies that we have to disinvest in.”

Chidambaram appeals to CIL unions. A final decision likely by PMO. Government hopeful of raising Rs 40,000 crore from stake sale proceeds this fiscal.

“We will talk to banks. I think they are cautious.”

FM to meet PSU bank chiefs this month to ask them to pass on interest rate cut by RBI to consumers.

“Decision on coal pricing and allocation to power plants by month-end.”

Inter-ministerial committee led by coal secretary to decide on coal block allocation. Government also considering physical pooling of coal as an alternative to coal pricing.

“We have to take a long-term view. Significant results have taken place and we are looking at more reforms.”

Rupee touched a life time low of 58.96 against the US dollar on Wednesday,registering over a 7 per cent fall since May 2013 with similar fall in the South African Rand,Turkish Lira and Brazilian Real.

“Policy on gas pricing to be finalised this month.”

Gas pricing formula proposed by PM’s economic advisory council chief C Rangarajan under review by oil ministry and is expected to bet taken up by the Cabinet Committee on Economic Affairs.

On skill development

Cabinet Committee on Skill Development set up and also National Skill Development Agency. More initiatives by August as government looks to skill 500 mn people by 2022.

“4.8 per cent fiscal deficit target is achievable.”

Plan and non-plan expenditure in April on target at 4.5% and 6.9% of the Budget estimate. Revenue collections too on target.

“Revision in FDI limits being considered.”

Review includes all sectors including defence. Committee led by DEA Secretary to submit its report by early next week,will then be discussed with commerce minister and then taken to the PM.

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