India PM rules out chance of return to 1991 crisis: report

MUMBAI Sat Aug 17, 2013 7:21am EDT

Indian Prime Minister Manmohan Singh delivers a speech at a hotel in Tokyo May 28, 2013. REUTERS/Yuya Shino

Indian Prime Minister Manmohan Singh delivers a speech at a hotel in Tokyo May 28, 2013.

Credit: Reuters/Yuya Shino

MUMBAI (Reuters) - There is "no question" of India going back to an economic crisis experienced in 1991, as its rupee currency is now linked to the market and foreign exchange reserves are adequate, Prime Minister Manmohan Singh said on Saturday.

Asia's third largest economy is growing at its slowest pace in a decade, while the rupee, the region's worst performer this year, is at an all-time low, and the central bank has enough cash to pay for seven months of imports.

"There is no question of going back to 1991," Singh said in a Press Trust of India report published by the Economic Times newspaper on its website, making reference to a balance of payments crisis the country suffered that year.

"At that time foreign exchange in India was a fixed rate. Now it is linked to market. We only correct the volatility of the rupee."

In 1991, with just enough reserves to cover three weeks of imports, India was forced to pledge its gold in order to pay its bills and had to push through reforms to start opening up the economy.

Singh was finance minister at the time and is widely regarded as the man who saved the economy.

The news agency report said Singh acknowledged India's ballooning current account deficit, which he blamed on large imports of gold as a contributing factor.

"We seem to be investing a lot in unproductive assets," Singh said.

India is trying to curb its citizens' apparently insatiable demand for gold, through measures such as hiking import duties, banning the import of coins and medallions and making domestic buyers pay cash.

The government wants to hold bullion imports this year to "well below" last year's figure of 845 metric tons.

Imports by the world's biggest bullion buyer hit a record 162 metric tons in May as global prices fell, prompting a duty increase to 8 percent. Though they then fell to about 31 metric tons in June, imports revived to 47.6 metric tons in July.

India's current account deficit stands at a record high of 4.8 percent of gross domestic product, while economic growth has slowed to 5 percent.

Concerns that policymakers were losing control over the currency spread this week to the stock market .NSEI, which dropped 4 percent on Friday for its biggest one-day decline in nearly two years.

(Reporting by Anurag Kotoky; Editing by Clarence Fernandez)

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Comments (2)
dreamguru2 wrote:
The funny and phony Manmohan Singh’s time is up , like he brought the reforms into india , I think he is taking it back .
Gold is not an unproductive asset.
Guess what I will let u in on something so secretive that u will do a bangra dance. the real unproductive asset is rice at rs 1- 3 whatever . instead of your stupid Food subsidy bill , u can introduce the Parliament canteen rate scheme country wide and we can have meals for Rs 2 and chicken biriyani for Rs 20 . way to go sic .

Aug 17, 2013 10:56am EDT  --  Report as abuse
Robot wrote:
Any unreal real estate BOOM takes economy to disaster, India is done deal for next 30 years. Unproductive asset is what goes to Robert Vadra’s account due to fictious real estate deals not Gold. Gold has absolute value (however you look at it) because central banks cant print it. Money did change hand it does not matter whether some one bought potatoes or gold. If Mr Manmohan thinks gold is where CAD is why does not he buy gold digging companies and get the $ back which eventually where it goes then convert to just labor.

What ever Manmohan did in 1991 was the only possible option and the outcomes were defacto (no credit/blame to Mr Minister here). You got 20 years of so called reform’s back to square 1. Congress has only interest in keeping people poor & throw these subsidies just as throwing breads to dogs.

Aug 17, 2013 8:22pm EDT  --  Report as abuse
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