Indian Finance Minister Palaniappan Chidambaram talks about the nation’s economy. Chidambaram said India needs lower interest rates to bolster economic growth and sought a stronger exchange rate as he prepares to deepen the government’s economic-reform agenda. He spoke with Bloomberg Television’s Aika Nanao in Tokyo on Oct. 12. (Source: Bloomberg)
“We hope that the RBI will be more benevolent with its policy†if it’s convinced the government is taking credible steps to lower the fiscal deficit and contain inflation, Mayaram said in Tokyo, where he participated in annual meetings of the International Monetary Fund along with Chidambaram. “They should give†some signals before March, he said.
Indian policy makers are trying to bring growth back from near the lowest in three years, with the International Monetary Fund saying last week the outlook for Asia’s third-largest economy is unusually uncertain. The government has revamped economic policy since Chidambaram, 67, became finance minister on July 31, opening up to more investment from abroad and raising subsidized diesel prices to tackle a budget deficit.
The push snapped months of gridlock over how to revive the economy, helping the rupee rebound from a record low.
Mayaram said he expects the rupee to strengthen to 50 to 51 per dollar in a couple of months, compared with 52.82 last week. It has surged more than 5 percent against the dollar in the past three months, the most among major Asian currencies, buoyed by the biggest opening of the economy to overseas companies in a decade.
“I think the rupee must appreciate a little more,†Chidambaram said in a Bloomberg Television interview in Tokyo on Oct. 12. “It has appreciated about 5 or 6 percent in the last few weeks, but I think the rupee must find a reasonable level, its true level.â€
The pace of Indian price increases is the fastest in major emerging markets and above the central bank’s comfort level of about 5 percent. Inflation hasn’t been tamed yet and supply constraints are adding to price pressures, Chidambaram said.
A further advance in the rupee will help to curb the increase in costs, he said. The central bank can’t be expected to bear the burden of containing inflation by itself, the finance minister said.
Via – Bloomberg
