MUMBAI |
Sat Aug 17, 2013 6:37pm IST
(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) 
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