"There are not just external factors, there are also domestic factors. We recognise that there are domestic factors. One of the domestic factors is that we allowed the fiscal deficit to be breached and we allowed current account deficit to swell because of certain decisions that we took during the period 2009 to 2011," he said. This was the period when government announced stimulus to ward off impact of collapse of western economies.
"It brought us growth, it stabilised the economy, we swayed off the very serious consequences of the 2008 collapse of the US economy. But it cost us in terms of fiscal deficit and current account deficit," Chidambaram said. The government, he said, had steps to check fiscal deficit and is now on path of fiscal consolidation.
The Finance Minister said the exchange rate was remarkably stable between August 2012 and May 2013 but rupee has come under pressure since May 22. "All the currencies of all the emerging economies have come under pressure. For the moment we believe that the value of the rupee has overshot its true value," he said, refusing to speculate on the way rupee will move in near future. "We have to be patient, we have to be firm, we have to be clear headed... in order to strengthen the fundamentals of the economy," he said. "I am confident that the rupee will find its true appropriate level."