Manila(PTI): With the rupee fast losing value against the US dollar, Finance Minister Pranab Mukherjee, on Friday blamed volatility in global commodity prices for currency depreciation and said deteriorating balance of payment (BoP) situation in several Asian countries also put stress on currencies.
ADB President Haruhiko Kuroda speaks at the ADB annual meeting in Manila on Friday. AFP“In several Asian countries, excepting China, the BoP is under stress which leads to currency depreciation,” Mukherjee told reporters.
Mukherjee, who is attending 45th annual meeting of the Asian Development Bank Board of Governors here, said certain fundamentals in the Indian economy have to be corrected against the backdrop of the rating agency Standard and Poor’s downgrading outlook for the country’s sovereign rating.
However, he did not elaborate. Mukherjee, on Saturday, who will assume chairmanship of the ADB Board of Governors for a year, said the global issues which have a bearing on the Asian economies would be discussed at the meeting.
Although the meeting began on May 2, Philippine President Benigno Aquino III formally inaugurated the plenary marked by an impressive ballets by the local artists. India’s currency has suffered sharp losses by over 15 per cent in the last few months, leaving a bruising impact on the country’s imports, which mainly comprise crude oil.
The rupee depreciation has resulted in the higher landed cost of the crude oil by the state-owned oil marketing companies, which have not been able to pass on the price increase to the consumers.
With prospects of subsidy bill shooting the budgeted target of Rs 1.8 lakh crore, global rating agency Standard and Poor’s has downgraded the country’s sovereign rating outlook.
Asked about the rating outlook downgrades of the India’s sovereign rating, Mukherjee said fundamentals of the economy have to be corrected. “Fundamentals…we shall have to correct…,” he said without elaborating what action the government was mulling.
The main areas of concern for Mukherjee were Eurozone and Japan, as they provide a big markets to the merchandise from the developing world. “Unless recovery in Japan and Europe is fast-tracked….it will have its impact. Eurozone crisis is expected to cast its shadow…,” he said, adding the Asian region is still doing better than the developed countries.
“We will review the world economy…the (Asian) region is one of the important contributors to the world economy,” he said. India will be hosting the ADB annual meeting next year in New Delhi.
Amid perception of policy paralysis in the government, Finance Minister Pranab Mukherjee also assured the global financial community of reverting the Indian economy to recovery path by creating conditions for revival of private investment.
“For the current fiscal year, we have set our objective to focus on recovering our pre-crisis growth momentum, create conditions for rapid revival of high growth in private investment and address supply bottlenecks in agriculture, energy and transport sectors,” he said at the ADB Governor’s business session here.
The Finance Minister said despite adverse international environment, India managed to maintain GDP growth rate of about 7 per cent in 2011-12.
“I am confident that the strong fundamentals of our economy will help us return to a sustained growth path of 8 to 10 per cent per annum in the coming years,” Mukherjee added. He further said India’s banking has remained robust and the regulatory environment and environment in the financial sector have stood test of time.