Some comfort: Manmohan Singh says it's not return of 1991 economic crisis

Manmohan SinghManmohan Singh on Saturday called for “fresh thinking” on macro-economic policy-making. (Reuters)

A day after Indian financial markets were hit by the impact of capital controls set by the Reserve Bank of India, Prime Minister Manmohan Singh on Saturday called for "fresh thinking" on macro-economic policy-making, including the debate on growth and inflation.

Economic slowdown will not last long, says PM Manmohan Singh

"And I would venture to think that the time has come when we should revisit some of those areas — the possibilities and limitations of monetary policy in a globalised economy, in a fiscally constrained economy," Singh said after releasing the fourth volume of RBI History: Looking Back and Looking Ahead at his residence.

He said despite the upheavals, India is not about to face another economic crisis like the one experienced in 1991. "There is no question of going back to 1991. At that time foreign exchange in India was a fixed rate. Now it is linked to market. We only correct the volatility of the rupee," he said.

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Singh acknowledged that India's current account deficit was still high and blamed elevated imports of gold as a key factor. "We seem to be investing a lot in unproductive assets," he said.

Meanwhile, outgoing RBI Governor D Subbarao said inflation control will remain the focus of the bank's strategy to deal with the current crisis, despite Finance Minister P Chidambaram saying in parliament that restoring growth should be the overarching priority.

RBI's hawkish measures to keep the rupee from dipping contributed to the largest fall in the markets in two years on Friday.

As stock, currency and bond markets measured their losses over the weekend, Subbarao said, "The Reserve Bank is committed to inflation control, not because it does not care for growth but because it does care".

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