Brace for tough year, growth to slow: PM

MAN

Prime Minister Manmohan Singh Friday said the economy could see yet another bad year, with growth expected to be lower than the targeted 6.5 per cent in 2013-14.

Addressing industry leaders at the annual meeting of Assocham, Singh, however, asserted that "things will improve soon" and that the focus of his government's political critics on the experiences of one bad year, while "making for good television", presented "a very distorted picture".

Listing the UPA's economic achievements since 2004, Singh said his government was committed to narrowing the current account deficit to 2.5 per cent of GDP while warning that growth this year is not likely to recover to the extent estimated. "We will leave no stone unturned to ensure that economy rebounds," Singh said.

The Prime Minister said market volatility was of great concern and that the Reserve Bank of India has sought to bring stability. He hoped that the depreciation of the rupee would help sections of the Indian industry, especially by making exports more competitive.

Singh tried to allay fears that the central bank may increase interest rates to support the depreciating rupee. The RBI, earlier this week, took significant steps to curb speculation in the currency market by making short-term funds more expensive for commercial banks to access.

"These steps are not meant to signal an increase in the long-term interest rates. They are designed to contain speculative pressure on the currency. Once these short-term pressures have been contained, as I expect they will be, RBI can even consider reversing these pressures," Singh said.

He also said that the government would unveil more proposals on foreign direct investment but did not give details. India also needs to reduce its demand for gold and petroleum products, Singh added.

"We are committed to bringing the current account deficit under control by addressing the demand side and supply side of the problem. On the demand side, we need to reduce the demand for gold and the demand for petroleum products, the two biggest components of our trade deficit," he said. India's current account deficit was 4.8 per cent of GDP in 2012-13.

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