Days before stepping out of the finance minister’s shoes, the United Progressive Alliance’s Presidential candidate Pranab Mukherjee on Saturday said the government would come up with policy measures on Monday to strengthen the rupee in consultation with the Reserve Bank of India (RBI).
Mukherjee, who was on his first visit to the state and to his hometown in the Birbhum district after entering the race to Raisina Hill, told the media, “There are, no doubt, signs of weakness in the Indian economy. As far as the rupee versus the dollar is concerned, I had contacted the economic affairs department secretary yesterday to get in touch with the RBI governor. Today, I was informed some measures would be announced on Monday, which I do hope would provide stimulus to the market.”
This would be among the last initiatives by Mukherjee as finance minister, as the Congress leader is likely to step down from the post on June 26. He is expected to file his nomination papers for the Presidential election on June 28.
Mukherjee’s statement has come at a time when the rupee has plunged to a record low of 57.16 against the dollar.
|THE FM'S WEEKEND
- 9.30 am: Leaves from Dhakuria (Kolkata) for ancestral home at Mirati in Birbhum district. Felicitated by Congress workers in Hooghly, Bardhaman and Birbhum
- Afternoon: Reaches Mirati house, offers prayers at family temple, meets elder sister Annapurna Devi
- 5 pm: Leaves for Kolkata
- After 8 am: To start from Dhakuria residence for Belur Math to seek blessings
- 11 am-12 noon: Belur Math
- Afternoon: Likely to meet Governor M K Narayanan
- 2.30-3.30 pm: Meeting with party members
- 5.30 pm: To leave for Delhi
(The schedule may change if Mukherjee decides to meet West Bengal Chief Minister Mamata Banerjee)
According to market participants, the measures the RBI is likely to announce on Monday may include the issuance of bonds for non-resident Indians and a revised interest rate ceiling on FCNR (B) deposits.
“If some announcement is made, it is likely to be on NRI bonds... something like the India Millennium Bonds announced in 2000. Currently, all the negative news — be it on the current account deficit, India’s sovereign rating or high inflation — are out of the bag and already factored in. This is an appropriate time to make this announcement. It will provide some confidence to the market,” said the promoter of a Mumbai-based foreign exchange consultancy firm.
“There is a chance the RBI may increase the interest rate on FCNR (B) deposits further,” said an economist with a foreign bank.
Showing concern over the economic situation, Mukherjee said, “The GDP growth is at 6.5 per cent; there is inflationary pressure in the economy; there has been depreciation in the value of the rupee vis-à-vis the dollar. A large economy like India, which is third in purchasing power parity, cannot remain insulated from external influences. Therefore, I am concerned. But I am not depressed as the basic fundamentals of our economy are strong.”
US credit rating agency Fitch had downgraded India’s credit outlook to ‘negative’ from ‘stable’ on Monday, stating the country was hit by slow growth and elevated inflation along with challenges like corruption and a lack of reforms. Mukherjee had then said the agency report was based on old facts. Later, on Wednesday, Fitch also cut its outlook for several Indian financial institutions, including State Bank of India.
However, Mukherjee said compared to the calendar year 2011, when the country saw a foreign institutional investor (FII) outflow, from January to June 2012 India had seen an FII inflow of about $8 billion. He said the gross FDI (foreign direct investment) in 2011-12 was more than $46-48 billion.
The Presidential hopeful also requested all political parties to support his candidature. “Except one party, all other UPA allies have supported me. Even parties from outside, like the CPM, the Samajwadi Party, the BSP and the Shiv Sena, have extended their support. My request to all those parties who have not decided on this is to support the UPA candidate,” he said.