India should keep option open for IMF credit: Bimal Jalan

NEW DELHI: India should keep the option of seeking a line of credit from IMF open to help fix the economy against the backdrop of a weak external situation, former RBI governor Bimal Jalan has said.

"We have to keep all options open. And the reason for that is essentially, if you have seen Europe...

"When there was a pressure in the European markets, there was high deficit, high public debt and then International Monetary Fund pumped in money there, which stabilised the situation somewhat," Jalan told PTI when asked whether India should explore the possibility of approaching IMF for money.

There have been suggestions that one way of shoring up depleting forex cover as well as getting some foreign exchange to finance the widening Current Account Deficit is to be ready to borrow from the IMF in future, if required.

It may be stated that the IMF had bailed out New Delhi from balance of payment crises on more than two occasions, although several experts say that the country is in far stronger position compared to those times.

India's forex reserves decreased by USD 1.08 billion to USD 277.72 billion for the week ended August 23, according to the latest RBI data.

The rupee has continued to weaken against many foreign currencies, particularly the US dollar, despite a series of measures announced recently by the Reserve Bank and the Finance Ministry.

The worst performer in Asia, the domestic currency had touched an all time low of 68.80 to a dollar earlier in the week, though it later strengthened to below 66.

India's economic growth rate in 2012-13 slipped to a decade's low of 5 per cent from 6.2 per cent a year ago and the prospects for the current fiscal do not seem very promising.

Economic growth in the April-June quarter of this fiscal slipped to 4.4 per cent, the slowest pace in at least four years, dragged down by a contraction in manufacturing and mining.

Besides, the country has been reeling under the impact of a high Current Account Deficit (CAD) which rose to a historic level of 4.8 per cent of the Gross Domestic Product in 2012-13.

Yesterday, Prime Minister Manmohan Singh had attributed the decline in value of rupee to host of global and domestic factors like high CAD, US Federal Reserve plans to taper quantitative easing measures and tensions in Syria.