India’s Finance Minister Hints At Further Measures To Stabilize Rupee

Raising hopes on further economic reforms, India’s Finance Minister P Chidambaram Thursday said that Prime Minister Manmohan Singh wanted the implementation of more measures to stabilize the rupee.

Speaking after a meeting of the ruling UPA coalition, he said that Prime Minister Manmohan Singh was concerned about the volatility of the rupee which hit 57.32 -- its lowest against the dollar -- June 22.

The rupee had lost over 15 percent since February, following the euro zone crisis, policy paralysis and a slew of taxation measures that led to a dip in investor sentiment and outflow of the foreign funds.

"The prime minister underlined the need for a number of measures that will ensure that there is no volatility in the rupee," Chidambaram told reporters, Reuters reported.

However, he declined to elaborate on what the measures were.

The recent economic reform measures announced by the government, including a cut in fuel subsidies and FDI in key sectors like retail, aviation and broadcasting, helped the partially convertible rupee recover over 7 percent last week.

The economic reforms announced amid the strong opposition from the opposition parties as well as some of the partners of the ruling alliance put the government in a crisis. The Trinamool Congress withdrew its support to the UPA government over the issue.

Analysts have expressed concern over the future of the reforms since the ruling coalition has become a minority and the government is sustained by the outside support of parties with contradictory ideologies and interests.

However, Chidambaram said the government would go ahead with the reforms and would take measures to boost investments in the economy, Reuters reported.

"Investment is the key and that was underlined today," he said.

The rupee Thursday rose to 53.24 against dollar from its previous close of 53.51 and hit an intraday high of 53.17. The Forex market is waiting for the government’s borrowing plans for the second half of the year.  The government is expected to borrow Rs 2 trillion during the October-March period, amid speculations about it missing its deficit target for the financial year.

Gaining from the stimulus measures, the rupee Monday touched 53.04, its highest in four months.