Text of the Finance Minister Shri P.Chidambaram’s Statement made by him during a Press Conference:
There is widespread concern about the volatility in the currency markets. I may point out that all emerging market economies appear to be affected by such volatility. Thanks to the global slowdown as well as some domestic factors, the Indian economy is challenged. In the last twelve months, the government has taken a number of measures to contain inflation and to revive investment and growth. Some results are visible, yet there are many challenges that have to be overcome. Growth slowed down to 5 percent in 2012-13 and we expect that the growth trend will remain flattish in the first quarter, but even so we are in better health than many other countries of the world. Therefore, there is no reason for excessive or unwarranted pessimism.
We expect that growth will pick up in Q2 to Q4. Supporting this are (i) increase in sown area by about 9.1 percent; (ii) acceleration in the pace of Plan expenditure; and (iii) impact of the projects cleared by the CCI in the last few months.
For 2012-13, government made a promise on containing the fiscal deficit. government has redeemed that promise and the fiscal deficit was reduced to 4.9 percent. Besides, the Current Account Deficit (CAD) which was USD 88.2 billion was fully financed and there was also an accretion of USD 3.8 billion to the reserves. For 2013-14 too, government has made two commitments:
One, that the fiscal deficit will be contained at 4.8 percent; and
Two, that the CAD will be contained at USD 70 billion and will be fully and safely financed.
I reaffirm the two commitments, and shall continue to make every effort to communicate these two commitments to the markets and the stakeholders.
Some measures taken recently by the RBI have been the subject matter of different interpretations. We wish to make it clear that these measures were taken to reduce volatility in the markets and to quell speculation on the Indian rupee. There was— and is— no intention to introduce any type of capital control, including controls on repatriation. It is not the policy of the government or the RBI to resort to capital controls or reverse the direction of capital account liberalisation. The measures that were taken last week will be revisited as stability returns.
We believe that the rupee is undervalued and has overshot what is generally believed to be a reasonable and appropriate level. Capital inflows will, in due course, correct the position. On August 12, 2013, I had listed a number of measures that we will take to enhance the capital inflows by about USD 11 billion. Work is in progress on these measures and we are confident that the results will be visible in the near future. FDI inflows in Q1 were USD 9.14 billion, an increase of 70 percent over the same quarter last year. Exports have risen by 11.7 percent in July 2013 over July 2012 and the trade deficit in June and July 2013 has narrowed to USD 12.3 billion each month. Net services exports have increased every month since April. These were USD 6.1 billion in June 2013 compared to USD 4.5 billion in June 2012. As a result, CAD is narrower. We are exploring structural measures to further reduce the CAD to sustainable levels and, in the meantime, to improve capital inflows.
India’s debt indicators are within prudent limits. India does not have excessive public debt (central and state governments taken together). The overall public debt to GDP ratio has declined from 73.2 percent in 2006-07 to 66 percent in 2012-13. The economy’s external debt is only 21.2 percent of GDP. India’s reserves are USD 277 billion.
While the banking sector has seen a rise in non-performing assets, the projects to which the banks have lent are not inherently “uneconomical” or “unviable”; they are delayed. Steps are being taken to bring them on stream and they will begin to generate revenue. All our banks have a capital adequacy ratio higher than the Basel norms, and this year government will infuse Rs.14,000 crore to capitalise public sector banks.
Government wishes to state once again, emphatically, that revival and encouragement of growth will continue to be the focus of the government. Stronger growth will, in course of time, alleviate many of the challenges that we face. Therefore, there is no cause for the panic that seems to have gripped the currency markets and that is feeding into other markets. We are confident that stability will return to these markets and we can get on with the task of promoting investment and growth.
India faces an internal credit squeeze far greater than that of Greece, Ireland, Spain and Cyprus combined.
India is also stiing on a ticking foreign debt time bomb. We cannot repay debt with junk Rupee.
In the midst of all we have irresponsible food security bill has been passed which will feed nobody except congis. It will be mother of all the scams. The most corrupt and imncompetent govt in history of country has turned us in to a junk state.
7/D-141; Response to: The govt. is aware that people might not be responsible in how they implement their own responsibilities. It seems, all laws are made to make it impossible for such an eventuality, and we break the limit of the govt.'s imagination, time and again. The idea of deficit financing in a modern industrial economy was to make the consumer responsible, and the production would be an according and related priority. It is the consumer who is important, not the producer, and the 'producer king', is bending over backwards like he/she wants to implement the govt.'s hopes and aspirations. The producer is king, not the consumer, as the producer gives the consumer opportunities to consume what he has not experienced as a finished product, or manufactured product.
What should be a priority to the producer, is how secure his production facility is, and how secure his means are, towards the same. It appears, that the producer has the facilities and means to consider how he can expend, because his money seems to multiply. We are all in a manufacturing, or support manufacturing economy.
AS I read elsewhere, US for 100 dollars, has 40dollar worth of gold and prints 60 dollars currency because of the volatility of the metal. printing 40 dollar of currency for 40 dollar worth of gold will be problem in practice. Here, the government does not appear to have the volume of counterfeit in circulation. Such can be rejected in bank and wiped out but it is in float in the transaction of public and hence a source of inflation. One can recall the words of RBI governor that finanace ministry should send reliable data which appears to suggest some cooked up data contradictory to what is seen in reality is sent. Perhaps in order not to increase the ire of the public and to give false encouragement of a rosy picture, the FM speaks so. No one knows where the data he says are available in public domain to study.With all fan fare, outshouting the opposition, that they are reactionaries, the government said it is opening up multibrand retail to the multinationals. Well, how many picked up courge to enter in? The shop is open and no one to buy the schemes of government. Revival means lapse of a particular scheme on a date and continuance further. When did the multibrand retail scheme lapse for its revival?
About the food security bill, it seems that the poor are being given food by the govt., perhaps I am mistaken. The issue seems to be, that the value of the rupee has no fixed standard of value, and the govt. prints copious amounts of money. Food grown in India, can be distributed by the govt., to the poor, and the farmer can also avail of money in exchange for food given to the govt. But, the international value of the Indian Rupee, seems to be the issue of the Indian economy, when it shouldn't be, on the matter of food distribution to everyone, including the poor. The vegetable vendor, also doesn't have food to eat, perhaps, when he has a lot of vegetables to sell.
How can the value of the Indian Rupee be influenced internationally, when the value of the Dollar, the Euro, and the Chinese Renminbi cannot be, and the respective and related govt.'s find this to be increasingly so? There is no practical standard, which the Dollar compares to, except to the Euro, and the Pound and Renminbi, and they are valued at less, than the Dollar. Also, when the Dollar is traded at a discount, in the market, then the profit that people make when the Dollar is sold, and traded for the Pound, for example, is also short lived, as thereafter, the value of the Pound to the Dollar takes a bigger pounding.
The issue seems to be, the govt. wants to educate everyone, and also give every engineer, M. B. A., and doctor opportunity for mass employment in his or her particular sector. This seems fantastical. The doctor engineer and M. B. A., represents an educated people, who weren't supposed to have this situation. I mean, what if every such educated person, who has a situation where he wants to manufacture, or dismantle structures, where there is no need, and where he creates the need? Should an engineer or doctor create life, destroy life, create and build any engineering structure by will, and destroy any such structure, again, because he would like the idea, or simply like to? This seems to be what is happening, and neither the govt., nor the people can control this trend.
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