Finance Minister Pranab Mukherjee today said the Indian economy was in a difficult situation and hoped the Reserve Bank of India will adjust its policy keeping in mind the situation.
“The RBI is one of the most respected monetary authorities… I am confident they (RBI) will adjust the monetary policy as we are adjusting fiscal policy,” the Finance Minister said at an Assocham conference on financial sector here, according to PTI.
The RBI is reviewing its monetary policy on Monday and the markets expect the central bank to cut interest rate by 25 basis points and banks’ cash reserve ratio by 50 basis points.
Mukherjee reiterated that he was not dismissing the concerns raised by rating agencies and said elevated levels of inflation, widening fiscal trade deficits, slow growth, and negative sentiment are challenges the economy is facing.
On concerns over fiscal deficit, he said, “We are taking steps, not sitting idle… if federal finances become weak, nobody will be able to bail out Indian economy.”
He urged industry to take note of areas of difficulties.
The finance minister also expressed concern about the development in the currency and said the rupee’s depreciation is closely linked to the euro crisis. The rupee has lost by almost 20 percent against the dollar in the last one year. Import bills can be brought down to an extent if oil prices fall, he said. He said exporters have been affected to slowdown in Europe and urged them to take advantage of the rupee’s fall.
Earlier, after rating agency Standard Poor’s warned that India may be the first fallen angel among BRIC, the finance minster had said the government is taking all necessary steps to return to the path of the targeted GDP growth. “Of course, it will take time but from this year, we expect to make a turnaround,” he had said.
(With inputs from PTI)