New Delhi: Prime Minister Manmohan Singh said on Friday that his government was committed to narrowing the current account deficit to 2.5% of gross domestic product (GDP) while warning that growth this year isn’t likely to recover to the extent estimated.
The economy has had a bad year, he said, but things will improve soon.
“We will leave no stone unturned to ensure that economy rebounds,” Singh told the annual session of the Associated Chambers of Commerce and Industry of India (Assocham).
The Prime Minister said market volatility was of great concern and that the Reserve Bank of India (RBI) has sought to bring stability.
The economy may grow slower than the previously expected 6.5% in the current fiscal year, Singh said, adding that the government would unveil more proposals on foreign direct investment (FDI), without giving details.
India also needs to reduce demand for gold and petroleum products, Singh said.
“We are committed to bringing the current account deficit under control by addressing the demand side and supply side of the problem. On the demand side, we need to reduce the demand for gold and the demand for petroleum products, the two biggest components of our trade deficit,” he said. India’s current account deficit was 4.8% of GDP in 2012-13.
Singh tried to allay fears that the central bank may increase interest rates to support the depreciating rupee.
RBI earlier this week took significant steps to curb speculation in the currency market by making short-term funds more expensive for commercial banks to access, which some analysts had interpreted as a change in the monetary policy stance of the central bank.
“These steps are not meant to signal an increase in the long-term interest rates. They are designed to contain speculative pressure on the currency. Once these short-term pressures have been contained, as I expect they will be, RBI can even consider reversing these pressure,” said Singh, a former central bank governor and finance minister.
Reuters contributed to this story.