Indian PM sees growth pickup, no danger of crisis

Indian PM sees growth pickup, no danger of crisis
Indian Prime Minister Manmohan Singh.

NEW DELHI - India's premier, seeking to steady investor nerves over the rupee's plunge, said on Friday there was no danger of a repeat of the nation's 1991 balance of payments crisis, and forecast a pickup in economic growth.

Manmohan Singh, addressing parliament for the first time since the rupee went into a tailspin this month, called the currency's worst slide against the dollar in nearly two decades "certainly a shock".

But there is "no reason for anybody to believe we are going down the hill and 1991 is on the horizon," Singh told lawmakers.

In 1991, a foreign-exchange strapped government pawned its gold reserves in exchange for loans from the International Monetary Fund.

Singh called India's record current account deficit -- the widest measure of trade that has undermined the currency -- "unsustainably large".

But actions by policymakers' including restricting currency outflows and reducing gold imports to narrow the trade gap would bear fruit, he said.

India is faced "with important challenges but we have the capacity to address them -- it is at times like these a nation shows what is truly capable of," he said.

After Singh's speech, the rupee was trading at 66.4 to the dollar, comfortably stronger than the record near 69 rupees touched on Wednesday, while shares were up 1.25 per cent at 18,631 points.

Economic growth will pick up in the second half of the year, he said, and added the rupee's plunge could prove a blessing by boosting export competitiveness.

But he warned Indians to brace for higher inflation due to costlier import prices, especially of fuel, after the rupee's crash to lifetime lows.

Singh, a renowned economist hailed for lighting the fuse for India's fast growth in the 1990s as finance minister, has been under fire as premier with his government hit by a string of corruption scandals that have sapped foreign investor confidence.

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