India last approached the IMF for funds in 1991 during a balance of payments crisis that was considered a national embarrassment. (Photo/PTI)
Hit by a currency crisis and poor growth, India today ruled out approaching the International Monetary Fund (IMF) for assistance, saying the economic situation has not reached a point where outside help is warranted.
Planning Commission Deputy Chairman Montek Singh Ahluwalia said the RBI's forex reserves are adequate to manage the difficult situation. India's foreign exchange reserves were up at 278.602 billion USD as of August 9.
"Our current economic situation does not warrant it. I do not anticipate it in the near future," Ahluwalia said, adding "India's reserves are comfortable."
Ahluwalia was asked to comment at a news conference whether India would seek outside help like approaching the IMF for assistance against the backdrop of a wave of poor economic news for the country.
He was briefing newsmen about the upcoming summit of G20 economies that included India. The two-day summit which will be attended by Prime Minister Manmohan Singh is to be held in St Petersburg in Russia from September 5. The Prime Minister is leaving for the eighth summit of the G20 on September 4.
India last approached the IMF for funds in 1991 during a balance of payments crisis that was considered a national embarrassment.
The rupee collapsed to a lifetime low of 68.85 against the dollar on August 28 before staging a recovery while economic growth in the April-June quarter slid to 4.4 per cent. The rupee closed at 65.70 against the dollar yesterday.
Replying to questions, Ahluwalia said there will be no "real improvement" in the Current Account Deficit(CAD) till the end of the second quarter(July-September) this year.
Government is aiming to bring down the CAD, which touched a record high of USD 88 billion or 4.8 per cent of GDP in 2012-13, to USD 70 billion or 3.7 per cent of GDP this fiscal.
On the volatility in the Indian currency, Ahluwalia said depreciation can be good for the economy to some extent as this will help to increase the country's export competitiveness and discourage imports.
He attributed rupee fall to various global and domestic factors including unsustainably large Current Account Deficit (CAD) and US Federal Reserve plans to taper quantitative easing measures.
Ahluwalia said it would be wrong to suggest that except for the Indian rupee all other currencies in the world are "stable".
"The fact is that Rupee has depreciated more than others," he said.
On trade issues, Ahluwalia said the G20 is expected to take a keen interest in the maintenance of a robust multilateral trading system and press for measures to resist protectionism.
He said India is pinning hopes on the the Bali Ministerial meet in December for further progress of the WTO Doha round trade negotiations for a successful conclusion.
Referring to financial stability measures, Ahluwalia said the five-nation BRICS may reach a consensus on the sidelines of the G-20 summit on creating a USD 100 billion currency reserve fund to help ease short-term liquidity presesure and safeguard financial stability of major emerging economies. Besides India, the other member-countries are Brazil, Russia, China and South Africa.
The BRICS bloc of large emrging economies is also reported to have agreed on the capital structure for a proposed development bank that aims to reduce their reliance on Western financial institutions.
Ahluwalia, hoeever, said an announcement by BRICS on the bank is unlikely at the St Ptersburg summit.
He said the St Petersburg Action Plan is expected to commit the G20 countries to a range of policy measures and structural reforms for a strong, sustainable and balanced growth and also address key risks to the global economy in the near term.
Ahluwalia, who will be India's 'sherpa' at the G20 summit, said currency volatility will also form important part of deliberations of the world leaders.