Mukherjee hints at austerity as rupee dips to record low

New Delhi: The Indian government is planning to introduce some austerity to aid fiscal consolidation, Finance Minister Pranab Mukherjee said Wednesday as the rupee slumped to a record low of 54.50 against the dollar and stock markets tumbled.

Mukherjee said he would take austerity measures to bring more fiscal discipline and send a right signal to the market.

“I am going to put in some austerity measures. It is important to send a right signal,” Mukherjee told lawmakers in the Rajya Sabha.

The Indian rupee took a severe beating and dipped to a record low of 54.50 against a US dollar. Rupee has weakened almost 10 per cent since March.

This is the weakest level of rupee recorded so far. The earlier record low of 54.30 to a dollar was hit in mid-December last year.

The partially convertible rupee also hit a record closing low of 54.49 to a dollar. The rupee had closed at 53.78 against a dollar Tuesday.

Blaming the eurozone crisis for the economic slowdown, the sharp drop in the stock markets and rupee, Mukherjee asserted that India’s growth story was intact and the government was taking measures to revive growth and attract overseas investments.

“Yes, we are concerned that our GDP growth has come down. It will be 6.9 per cent in 2011-12, some are saying that it might be even low,” Mukherjee said.

Replying to a debate on the Union Budget 2012-13 in the Rajya Sabha, Mukherjee said slowdown in economic growth was a matter of concern but there was no need to press the panic button.

“India’s growth story is intact,” he said.

After the debate, the Rajya Sabha, the upper house of Indian Parliament, Wednesday returned the Appropriation Bill and Finance Bill, 2012, to the Lok Sabha.

Mukherjee said crisis in the eurozone, especially in Greece, was causing uncertainty in India and other developing countries as well.

“India cannot ignore the global economic situation,” Mukherjee said while referring to the plunge in stock markets.

The Finance Minister emphasised that he was not trying to pass on the blame to someone else.

“Don’t think that I am trying to pass on the buck elsewhere. The buck stops at me, I agree. I am owning the responsibility… but we shall have to keep in mind that this is a difficult world,” he said.

Continued sell-off by the Foreign Institutional Investors led to almost two per cent slump in the country’s benchmark indices.

The benchmark Sensex of the Bombay Stock Exchange slumped below 16,000-point mark Wednesday. The Sensex closed 1.83 per cent down at 16,030.09 points.

The wide-based Nifty of the National Stock Exchange also closed 1.71 per cent down at 4,858.25 points.

Referring to Vodafone tax row, the Finance Minister said he welcomed foreign investments but would not allow the country to be a tax haven.

“Yes, I want FDI, I have taken a series of measures for FDI (Foreign Direct Investment) and FII (Foreign Institutional Investment),” he said.

Later, talking to reporters, Mukherjee said he has directed officials in his ministry to look at what could be done to bring more fiscal discipline.