India eyes joint action to halt rupee slide
New Delhi, August 31, 2013
India's prime minister sought to quell fears of a currency crisis yesterday as economic growth fell to a four-year low, while New Delhi raised prospects of joint intervention with other countries following the rupee's crash to record lows.
The Finance Ministry's principal economic adviser Dipak Dasgupta said India was liaising with governments in other emerging-market countries to co-ordinate intervention in offshore currency markets. He predicted action soon, but declined to share specific details of the discussions.
The move to target traders abroad came as the rupee suffered its worst month ever, dropping more than eight per cent against the dollar in August as confidence drained out of India's economy.
Data yesterday showed economic growth decelerated to 4.4pc in the April-June quarter, its slowest rate since the first three months of 2009.
Earlier in the day, Prime Minister Manmohan Singh said the currency's fall was a matter of concern, but dismissed doomsayers' predictions for the economy, insisting its fundamentals remained sound and its banking system was well capitalised above international requirements.
"We need to ensure the fundamentals of the economy remain strong so that India continues to grow at a healthy rate for many years to come," the octogenarian prime minister told MPs in his first significant speech to parliament on the economy in months. "That we will ensure. We are no doubt faced with important challenges."
India suffered decade-low growth of 5pc in the fiscal year that ended in March, and many analysts expect this year to be worse.
Weak growth, a record high current account deficit and concerns about the government's finances are proving a toxic mix for the rupee, which hit a record low of 68.85 to the dollar on Wednesday after falling 20pc since May.
Aggressive dollar selling by the Reserve Bank of India (RBI), rather than Singh's speech to parliament, helped pull the rupee out of a slide back towards the lows yesterday, and it ended at 65.70 per dollar, firming from Thursday's close of 66.55 and finishing stronger for a second straight day.
But RBI intervention is proving costly, with data yesterday showing currency reserves fell to $277.72 billion as of August 23, enough to cover over six months of imports and down $19bn since the end of last year.-Reuters