Manmohan Singh said, “Rupee witnessed sharp decline due to certain unexpected external factors.” The Prime Minister said that the fallout of changing US federal policy has caused general weakening in global currencies.

Click here to read full text of PM’s statement in LS

Making a statement on the state of economy in Parliament amid concerns over rapid depreciation of rupee, Singh said the country has to be ready for short-term shocks but the government will ensure that the fundamentals of economy remain strong.

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“There may be short term shocks to our economy and we need to face them. That is the reality of the globalised economy, whose benefits we have reaped,” Singh said. "We are faced with challenges but we have the capacity to deal with them," he said. “RBI and government have taken a number of steps to stabilize rupee,” the Prime Minister said.

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“Part of rupee depreciation needed adjustment as inflation in India was much higher than advanced countries,” the Prime Minister said.

There is no question of reversing the policies just because there is some turbulence in capital and currency markets, he said. “The sudden decline in exchange rate is certainly a shock, but we will address this through other measures, not through capital controls or by reversing reforms,” the Prime Minister said.

Manmohan Singh said that easy reforms of the past have been done but the difficult ones remain. "We have the more difficult reforms to do such as reduction of subsidies, insurance and pension sector reforms, eliminating bureaucratic red tape and implementing Goods and Services Tax," he said.

"These are not low hanging fruit and need political consensus. We need to forge consensus on such vital issues. I urge political parties to work towards this and to join in the government's efforts to put the economy back on the path of stable and sustainable growth," Singh said.

He also stressed on the need to reduce appetite for gold and petroleum products. “We need to reduce our appetite for gold and economize use of petroleum products,” he added.

He also assured the House that the government is taking effective steps and is confident of lowering current account deficit to USD 70 billion this fiscal. "... the rupee has been especially hit because of our large CAD and some other domestic factors. We intend to act to reduce the CAD and improve the economy," Singh said.

The Prime Minister said the medium term objective of the government will be to reduce CAD to 2.5 percent of GDP and the government will make all efforts to maintain "a macro economic framework friendly to foreign capital inflows to enable orderly financing of the current account deficit".


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