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Singh: India won't fell in crisis again

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Staff writer ▼ | August 19, 2013
India will not go back to an economic crisis experienced in 1991 because its currency is now linked to the market and foreign exchange reserves are adequate, Prime Minister Manmohan Singh said.
Manmohan Singh
Manmohan SinghIndia will not go back to an economic crisis experienced in 1991 because its currency is now linked to the market and foreign exchange reserves are adequate, Prime Minister Manmohan Singh said.


India is growing at its slowest pace in a decade, while its rupee currency is at an all-time low.

"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," Singh said in a Press Trust of India report published by the Economic Times newspaper.

In 1991, with just enough reserves to cover three weeks of imports, India was forced to pledge its gold in order to pay its bills and had to push through reforms to start opening up the economy. Mr. Singh was finance minister at the time and is widely regarded as the man who saved the economy. The central bank now has enough cash to pay for seven months of imports.

Mr. Singh said that India's huge current account deficit is to blame on large imports of gold as a contributing factor : "We seem to be investing a lot in unproductive assets". India banned the import of coins and medallions and wants to hold bullion imports this year below last year's figure of 845 tonnes.

Imports by the world's biggest bullion buyer hit a record 162 tonnes in May as global prices fell, prompting a duty increase to 8 percent. Though they then fell to about 31 tonnes in June, imports revived to 47.6 tonnes in July.

India's current account deficit stands at a record high of 4.8 percent of gross domestic product (GDP), while economic growth has slowed to 5 percent.


 

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