On the sidelines of the 16th Hindustan Times Leadership Summit, Finance minister Arun Jaitley today said more measures will be taken to stabilize rupee and tame current account deficit. At the same time, he assured business community that our country will be quick to respond to global headwinds that impact the economy.
The minister also suggested that current transitory woes pertaining to weakening domestic currency and burgeoning CAD could not impact long-term capital flows-foreign direct investment (FDI) .
The assurance of more policy measures comes following the RBI's surprise 'status quo' move in its fourth bi-monthly monetary policy review meet on Friday, which led the rupee to fall past the 74 levels mark against the dollar. The central bank against market expectations kept the repo rate on hold at 6.5%, with a shift in monetary policy stance to 'calibrated tightening' from the earlier 'neutral' stance. The rupee however recouped some of the lost ground and closed at 73.77 in Friday's session, down 18 paise in comparison to its previous closing.
At the event, Jaitley told policy makers and business leaders that, "As far as the CAD is concerned, it is obviously linked to global oil prices in the Indian context. The way oil prices have been going up, there has been some adverse impact on the CAD. We are trying to take measures to narrow it down. Some more steps are likely".
The current account deficit of India in the June quarter increased to a 4-year high of $14.3 billion or 2.4% of GDP, putting pressure on already depreciating Indian currency. To curb the rising CAD, the government in the last week of September raised import duty on some 19 non-essential items that include refrigerators, air-conditioners, jewellery, diamonds and jet fuel amongst others.
"The achievement of a consistent growth rate of 7.5 % plus or minus in today's global situation is the highest. There are huge avenues of growth for India over the next 10-20 years, which is what investors are looking at. For example, the kind of investments taking place in rural India is adding more to the size of India's middle class," the minister said.
The minister showed confidence in meeting the fiscal deficit target for the current FY of 3.3% as collection of direct tax has stood reasonably strong.