New Delhi: There seems to be no end to the bad news on the economic front with the rupee closing at an all-time low of 68.80 level, down 256 paise - the biggest one day fall ever - from the close on Tuesday. The Sensex, meanwhile, was on a rollercoaster ride, crashing 500 points before recovering to end flat even as crude prices at a six-month high. The rupee has fallen 8.1 per cent this week and 12.2 per cent in August.
It was U-turn for the Sensex that gained 28.07 points to close at 17996.15 after seeing nearly 550 points recovery from day's low of 17448.71. The Nifty was down 2.45 points at 5285 while the BSE Midcap and Smallcap indices fell 1 percent each.
Commerce and Industry Minister Anand Sharma suggested pledging the country's gold reserves to contain the widening current account deficit. "Indians have a high appetite for gold. That of course is for the banking sectors, other bankers and RBI to see that how you can monitise gold in a country with over 31,000 tonnes of declared gold above the ground, gold that is the declared part. So even if 500 tonnes is monitised at today's value it takes care of your CAD. But that is a decision which is beyond me. But I am just pointing in that direction, but can we do something. I think we can."
Putting up a brave face in the wake of falling rupee, Finance Minister P Chidambaram on Wednesday said that investors need to be taken into the confidence and more reforms are needed. "I believe what we need now is not less reforms but more reforms, not more restrictions but less restrictions. We have to add our reserves. Our reserves are adequate. We are one of the moderately indebted countries. Our external debt is only 24.10 per cent," he said.
"We have to add to our reserves by FDI, through NRI investments including deficits, by ECG and through banking capital. All options are on the table. No option is ruled out. Government will exercise the judgement at an appropriate time," he added.
Meanwhile, reacting to the current economic scenario, India Inc said, "Consideration has to be given to issuing a sovereign guaranteed bond which would be of a substantial amount. Additionally, we need to explore if FIIs can be exempt from short term capital gains tax."
"While the Government and the RBI have been taking measures to curb speculation, more needs to be done on this front to remove the avoidable edge to volatility," CII said.
Stressing that foreign institutional investors (FIIs) must be reassured through appropriate action by the government, corporate India said the solution lies in correcting the current account deficit (CAD) by building a robust exports sector and strong domestic manufacturing base.
Besides, the industry believes the government must refrain from announcing any measures that can be viewed as "unfriendly for business".
Industry body Assocham also suggested that India convene an urgent meeting to engage policy makers from other emerging market economies (EMEs) to tackle the impact of US Federal Reserve's actions on the rupee.
The government has also come under heavy criticism from Opposition parties. JDU leader Sharad Yadav said that the UPA government is still not worried but it is the government which has created the present economic crisis. "They talk of foreign investment, where is the foreign money coming? We have never seen such a bad economic scenario, even election will not help the situation," he said.
Meanwhile, BJP leader Ravi Shankar Prasad took a potshot at the Congress, saying, "Manmohan Singh and Chidambaram have ran out of ideas." He compared the country's growth rate with that of BJP ruled states. He said, "Why is that at the same time the government in states of Gujarat, MP, Chhattisgarh and Goa have +10 per cent growth rate, it is because of good governance."
CPI leader Sitaram Yechury said, "Though Prime Minister Manmohan Singh says that the present situation is not different from that of 1991 but the situation is similar. The situation is worse as the rich are not investing. They are parking their money in either gold, property or foreign currencies."
With Additional Inputs From PTI
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