NEW DELHI—India on Friday assured foreign investors it is not contemplating capital controls as a step to stabilize the falling Indian rupee. The government also released new growth figures that showed the country’s economic slowdown had deepened.
Prime Minister Manmohan Singh told India’s Parliament that the rupee’s sudden decline was a shock, but his government will not address by it imposing capital controls or by reversing economic reforms.
India’s stock market has dropped more than 10 per cent in the past three months and the rupee has lost a sixth of its value against the dollar this year. Much of the currency’s fall has been in the past month.
A government statement on Friday said India’s economic growth fell to 4.4 per cent in the April-June quarter. The economy, Asia’s third largest, grew 5 per cent in the financial year ended March, its slowest in a decade and well off the 8 per cent pace it had averaged over those 10 years.
Singh said the rupee’s weakness largely stems from India’s large current account deficit, caused by huge imports of gold and higher costs of crude oil and coal imports.
The government has raised gold taxes and hiked deposit rates to combat the outflow of money. It also put new limits on the amount of money Indian companies and individuals can send abroad, sparking concerns such controls would be extended to foreigners with investments in India.
Singh said that global tensions over Syria and the prospect of the U.S. Federal Reserve scaling back its policy of quantitative easing have caused general weakness in emerging market currencies.
He also said it is clear there is not adequate co-ordination of the economic policies, monetary and financial, of developed countries.
He said he would emphasize at next month’s Group of 20 meeting in Russia that developed countries, in conducting their fiscal and monetary policies, should take into account the repercussions on the economies of emerging and developing nations.
© 2013 The Canadian Press