Even as rupee breached the 65-mark and mayhem has marred the stock market in the last a few days, a clueless Finance Minister P Chidambaram on Thursday chose to mollify the sentiments by saying that the economy is only paying the price for global slowdown and markets will soon stabilise, while reiterating that no capital control measures are on the anvil.
The Finance Minister, who briefed the media after a marathon three-hour long meeting with RBI Governor D Subbarao and Governor designate Raghuram Rajan to discuss measures to bring the economy back on track, instead blamed unknown "stakeholders" for spreading misinformation about the Government's efforts.
When asked as to why panic prevailed in the market despite assurances from the Government and its commitment towards arresting fiscal deficit at 4.8 per cent and controlling current account deficit (CAD) at $70 billion level, Chidambaram said, "we are trying to communicate but the communication is getting distorted. People are spreading all sorts of imaginary numbers. I request the concerned stakeholders not to distort the message."
He said that re-starting iron ore production (through resumption of iron ore mining in states like Goa where it is currently banned), enhancing production of coal and facilitating its supply to power companies and increasing fertiliser producing infrastructure was the need of the hour, as these measures would kick start economic growth.
On rupee having fallen by 5.5 per cent in five days, Chidambaram said the currency is undervalued and has overshot appropriate levels but sought to assuage investors asserting there is no need for "excessive and unwarranted pessimism".
"There is no cause for panic that seems to have gripped the currency market 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," he added.Stressing that there was no reason for "excessive or unwarranted pessimism", the Finance Minister said the recent steps taken by the Reserve Bank to reduce volatility in forex market and quell speculation would be revisited.
Growth in the first quarter of current fiscal is likely to remain flattish, Chidambaram said and chose to cushion the sorry state of affairs by saying that "we are in better health than many other countries of the world.... We expect growth will pick up in Q2 to Q4".India's debt indicators, he said, were within the prudent limits. "The overall public debt to GDP ratio has declined from 73.2 per cent in 2006-07 to 66 per cent in 2012-13. The economy's external debt is only 21.2 per cent of GDP. India's reserves are $277 billion," the minister informed.
Meanwhile Subbarao in a separate media briefing said India has adequate forex reserve to meet the current situation and the central bank will take appropriate measures to curb rupee volatility. Chidambaram also said there was no move to introduce any capital control measures to check CAD.
"There was and is, no intention to introduce any type of capital control, including controls on repatriations. It is not the policy of the government or the RBI to resort to capital control or reverse the direction of capital account of liberalisation. The measures that were taken last week will be revisited as stability returns," Chidambaram said.