PM tries to alleviate fears over economy

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Senior BJP leader L.K. Advani, accompanied by a delegation of party MPs, talks to the media after meeting President

Amidst the rupee’s steep depreciation and the growing concerns about the state of the economy, Prime Minister Manmohan Singh has said though there may be short-term shocks to the economy, he expects growth to pick up in the second half of this fiscal.
The PM, who was speaking in the Lok Sabha on Friday, also sought to allay worries about the fall of rupee while making a statement on the economic situation in the country. While acknowledging that there are “concerns, justifiably so, of the impact this would have on our economy”, the PM said part of the rupee’s depreciation was merely an adjustment.
The PM’s statement in the LS was the first time he has spoken on the rupee’s free fall in recent days. The PM’s brief statement did not satisfy the Opposition which was on its feet protesting while the PM left the House immediately after speaking.
The Opposition parties, among them the BJP, AIADMK, Left and Akali Dal, then staged a walk-out.
Noting that inflation in India has been far higher than in advanced economies, the PM said it was therefore “natural that there has to be some correction in the exchange rate to account for this difference”.
He added, “To some extent, depreciation can be good for the economy as it will help to increase our export competitiveness and discourage imports.”
The PM also reiterated the government’s stand against reversal of reforms or resorting to capital controls to rescue the sliding rupee while stating that it fell due to both domestic and global factors.
Stating that there is no question of reversing policies just because there is some turbulence in the capital and currency markets, the PM said the “sudden decline in exchange rate is certainly a shock, but we will address this through other measures, not through capital controls or by reversing reforms”.
The PM also pitched for more reforms saying the difficult ones remain. “We have the more difficult reforms to do such as reduction of subsidies, insurance and pension sector reforms, eliminating bureaucratic red tape and implementing Goods and Services Tax,” he said.