PM rules out chance of return to 1991 crisis - report

MUMBAI Sat Aug 17, 2013 6:37pm IST

Prime Minister Manmohan Singh speaks during a news conference at the Government House in Bangkok May 30, 2013.REUTERS/Chaiwat Subprasom/Files

Prime Minister Manmohan Singh speaks during a news conference at the Government House in Bangkok May 30, 2013.

Credit: Reuters/Chaiwat Subprasom/Files

Related Topics

MUMBAI (Reuters) - There is "no question" of India going back to an economic crisis experienced in 1991, as its rupee currency is now linked to the market and foreign exchange reserves are adequate, Prime Minister Manmohan Singh said on Saturday.

Asia's third largest economy is growing at its slowest pace in a decade, while the rupee, the region's worst performer this year, is at an all-time low, and the central bank has enough cash to pay for seven months of imports.

"There is no question of going back to 1991," Singh said in a Press Trust of India report published by the Economic Times newspaper on its website, making reference to a balance of payments crisis the country suffered that year.

"At that time foreign exchange in India was a fixed rate. Now it is linked to market. We only correct the volatility of the rupee."

In 1991, with just enough reserves to cover three weeks of imports, India was forced to pledge its gold in order to pay its bills and had to push through reforms to start opening up the economy.

Singh was finance minister at the time and is widely regarded as the man who saved the economy.

The news agency report said Singh acknowledged India's ballooning current account deficit, which he blamed on large imports of gold as a contributing factor.

"We seem to be investing a lot in unproductive assets," Singh said.

India is trying to curb its citizens' apparently insatiable demand for gold, through measures such as hiking import duties, banning the import of coins and medallions and making domestic buyers pay cash.

The government wants to hold bullion imports this year to "well below" last year's figure of 845 tonnes.

Imports by the world's biggest bullion buyer hit a record 162 tonnes in May as global prices fell, prompting a duty increase to 8 percent. Though they then fell to about 31 tonnes in June, imports revived to 47.6 tonnes in July.

India's current account deficit stands at a record high of 4.8 percent of gross domestic product, while economic growth has slowed to 5 percent.

Concerns that policymakers were losing control over the currency spread this week to the stock market, which dropped 4 percent on Friday for its biggest one-day decline in nearly two years.

(Reporting by Anurag Kotoky; Editing by Clarence Fernandez)

FILED UNDER:
We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (5)
raju1960 wrote:
Like CBI, RBI is also a caged parrot. Who headed the RBI are the stage actors, act as per production and direction of Central government. This is real. Big names & High intellectuals monitoring RBI is an eye wash. Live example is Mr MMS. He worked well under shadow of PV, but failed as a PM.

Aug 17, 2013 4:48pm IST  --  Report as abuse
sun76 wrote:
The insatiable needs of indians for gold is due to few main reasons. We do not have any investment avenues that are safe for an average Indian. The common, man even many of the educated high earning individuals, do not invest in stocks. The stock market is mainly driven by FII’s who decide the fate of the indian stocks and not the performance of the companies.

The Indian manufacturing industry does not have any vision to be competitive except a few. While most of the companies & businesses believe in harvesting the market by importing majority of products from China.

Indian Industry lacks vision and patience on research to create innovation and leadership. This is due to education culture with the privatization into the hands of education barons. These education institutes are only making more white collared workers rather than leaders and thinkers.

So where will people invest?? Stocks are seen as major risk by the people. Other monetary instruments are useless due to inflation. So gold is still seen as safe heaven and it will remain one for years to come.

Aug 17, 2013 10:25am IST  --  Report as abuse
jvaishnav47 wrote:
Indian Prime Minister’s advise to RESERVE BANK OF INDIA is not convincing
———————————————————————
Economic growth, employment generation mainly depends upon govt fiscal policy,investors confidence, investment on infrastructure ,good governance etc so to govt is required to work hard rather then RBI.Economic growth do not depend upon rate which is determined by RBI.Fiscal policy dominated monetary policy

When Prime Minister is worried about fiscal /current account deficit ,how govt is going ahead with food security bill?Govt could have brought back black money lying in foreign Banks which could have satisfied “food ,clothing ,shelter’ issues
Govt is even failed to recover public money from nabbed on charges of big scams

Govt has never concentrated upon attracting foreign fund on long term basis ,increased investment cap of LIC,UTI etc brought capital market high ,bur these are short term measures.RBI actions have made cost of fund costlier for Banks , capital control steps
are unfair, sentiments of business community is hurt,Since there is no investment on infrastructure, there are no employment opportunities for young generation & now even to go abroad for study has become expensive.Govt is failed to visualize financial crisis.

C/33 PARVATI MANSION JAGDIP H VAISHNAV
214 D.B.MARG.
SENIOR CITIZEN
MUMBAI -400007
TEL NO 23073612

Aug 18, 2013 11:01am IST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

COAL BLOCK ALLOCATIONS

REUTERS SHOWCASE

Banned From Bidding

Banned From Bidding

India bans Finmeccanica from bidding for contracts amid graft case.  Full Article 

Sugar Talk

Sugar Talk

Sugar export rebound at risk from rising domestic prices.  Full Article 

GDP Preview

GDP Preview

Economy likely grew faster in June quarter: Reuters poll.  Full Article 

New Ordeal

New Ordeal

After disasters, stricken Malaysia Airlines staff brace for job cuts.  Full Article 

Deal Talk

Deal Talk

Kleiner to invest in messaging startup Snapchat at near-$10 bln valuation - report.  Full Article 

Expert Zone

Expert Zone

Column - Why inflation is so persistent.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage