As his government battles a steep fall in the value of the rupee and a stock market meltdown, Prime Minister Manmohan Singh on Saturday dismissed the possibility of a throwback to the 1991 balance of payments crisis situation and reversing the path of globalisation of the economy.
“There is no no question of going back to 1991 (balance of payment crisis). At that time foreign exchange in India was a fixed rate. Now it is linked to the market. We only correct the volatility of the rupee,” he said.
In 1991, Singh said, the country had only foreign exchange reserves for 15 days. “Now we have reserves for six to seven months. So there is no comparison. And no question of going back to the 1991 crisis,” he said at a function to release the fourth volume of RBI history, titled RBI History—Looking Back and Looking Ahead, at his Race Course residence.
When pointed out that the current account deficit was still high, Singh acknowledged the problem, saying high imports of gold was one of the major factors contributing to it. “We seem to be investing a lot in unproductive assets,” he added.
Asked about criticism that the Indian economy was too linked to the global economy and that was the reason for current problems and whether there would be a reversal of the progress, he said, “There is no such possibility.”
Calling for evolving a fresh thinking on RBI’s monetary policy, the PM said, “The time has come to look at the possibilities and limitations of the monetary policy in a globalised economy and dealing with the constraints of the macro-economic problems. That is where a fresh thinking is called for.”
He added, “I think Raghuram Rajan (governor-designate) will evolve a policy with the help of professional persons for a national consensus if we have to carry on with implementing social and economic changes in a complex economy.”
The remarks assume significance in context of the current debate over the RBI’s hawkish policy stance on checking inflation vis-a-vis government’s priority on promoting growth.
Singh said a degree of national consensus was required if the government has to carry out social and economic change in a country as large, as diverse and as complex as India is.
Hailing the Reserve Bank, he said it had served the country with great distinction, but “the best is yet to come”. The Prime Minister also wished outgoing governor D Subbarao