The Reserve Bank of India may consider reversing money tightening measures as soon as the short-term pressure on rupee is down.
Stating this in the annual session of Assocham, Prime Minister Manmohan singh also said that RBI's measures announced on Monday were not meant for long-term tightening.
In order to curb volatility in the forex market, the central bank had on Monday hiked the short-term rates for additional borrowings by banks, capped the regular borrowing amount by banks and conducted limited open market operation on Thursday.
Singh also announced that more reforms for Foreign Direct Investment are to be unveiled. The Government had on Wednesday announced liberalising FDI norms in 11 sectors, including telecom where the cap has been relaxed to 100 per cent.
Talking about political criticism, Singh said that UPA's performance on various grounds, be it overall GDP, agriculture growth, increase in real rural wages and reduction in poverty, have been impressive.
He also assured that the Government will not leave any stone unturned to bring economy back on rapid growth path.
Admitting that the economy was going through a difficult period, Singh assured the industry that the Government will leave no stone unturned to ensure a rebound.
He attributed the rupee decline to widening Current Account Deficit (CAD) and global factors and hoped that the steps taken by the Reserve Bank of India to arrest the rupee fall would be reversed with the easing of speculative pressure.
As regards the economy, he said though the basic fundamentals are sound and stable, the growth rate in the current financial year was likely to be lower than 6.5 per cent estimated at the time of presentation of the Budget in February.
“We will leave no stone unturned to ensure that the economy rebounds. I appeal to each one of you not to be overcome by negative sentiment,” Singh said.
“Let me begin by stating upfront that we, like most other countries, are going through a difficult period... It (industry) is looking to the government to bring the economy back to a higher growth path. This is a legitimate expectation and is also upper most in our mind,” he said.
Govt to remain pro-active
The Prime Minister assured the industry that the Government will remain pro-active in ensuring economic rebound.
“When things are going well, Government should interfere as little as possible. When things go badly, as they seem to be at present, it is the responsibility of the Government to become pro-active,” Singh said.
Keywords: RBI, monetary tightening, monetary tightening measures, rupee, short-term pressure on rupee, volatility in forex market, hike in short-term rates, cap on additional borrowing by banks, open market operation, Assocham, Manmohan Singh, India's GDP, India's economic growth,