Chidambaram Vows Reforms to Aid Growth as Rupee Resumes Drop

India’s finance minister signaled more policy changes to revive economic growth and said steps are being taken to stabilize the nation’s currency as it resumed a slide near a record low.

The economy is stronger than last year and government spending will help drive its expansion, said Chidambaram, who has spearheaded a nine-month policy push to counter the weakest Indian growth in a decade. The rupee, which plunged to a record low earlier this week, weakened as much as 1.3 percent to the dollar, reversing gains on 12 June after Fitch Ratings boosted India’s sovereign credit outlook to stable from negative.

The finance minister said no decision has been taken yet on whether to generate capital inflows by selling bonds to Indians living overseas, a statement that may have weighed on the currency as officials try to fund a record current-account gap.

Rupee Drop

The rupee depreciated 0.3 percent to 57.99 per dollar in Mumbai. It slid to an all-time low of 58.9850 on June 11 and is down 5.2 percent this year.

The Reserve Bank of India sold dollars to prevent the currency dropping to 60 per dollar, according to two people familiar with the matter, who asked not to be named as the information isn’t public.

Luring Inflows

Long-term investors, including sovereign-wealth funds, multilateral agencies and global central banks, can buy $5 billion more Indian sovereign debt, the central bank said in a statement on 12 June as it tries to lure inflows. The cap now stands at $30 billion, compared with $25 billion earlier.

Chidambaram said a review of restrictions on foreign-direct investment will be “resolved” before the end of the month. He indicated that changes to coal and gas prices to better reflect market rates are due in June as well.

He also said the rupee’s decline will pressure inflation. Consumer prices rose 9.31 percent in May from a year earlier.

Reserve Bank Governor Duvvuri Subbarao will keep there purchase rate at 7.25 percent on June 17. The rest see a reduction to 7 percent. Subbarao lowered the benchmark in January, March and May by 25 basis points at each meeting.