Prime Minister Narendra Modi has said his government will continue its ‘reform-to-transform’ process but signalled the country will not undervalue its exchange rate to boost trade.
“We have never tried to gain in trade at the expense of our partners. We do not follow ‘beggar thy neighbour’ macroeconomic policies,” Modi told a conference organised by the International Monetary Fund on Saturday.
“We have never undervalued our exchange rate. We add to world and Asian demand by running current account deficits. We are therefore good Asian and good global economic citizens, and a source of demand to our trading partners,” he said at the ‘Advancing Asia’ conference.
Despite devaluation of currencies by some countries and global economic challenges, Modi said India was a “haven of macro-economic stability and a beacon of hope”, with the country boosting its growth projection for the fiscal year ending March 31 to 7.6%.
“India has also shown that a large, diverse country can be managed in a way that can promote economic growth and maintain social stability,” he said.
“We do not intend to rest on these achievements because my agenda of ‘reform-to-transform’ still needs to be finished.”
European and Japanese central banks have adopted negative interest rate policies to perk up low inflation, but it has also added to the volatility in the financial markets and raised the spectre of competitive currency devaluation.
The Reserve Bank of India (RBI) Governor Raghuram Rajan, however, has resisted pressure from exporters and policy makers to devalue the Indian currency to support exports.
India’s exports shrank in January for the 14th straight month on continued weak demand from Europe. Exports fell 13.6% from January a year ago, data from the Ministry of Commerce and Industry showed last month.
India needs exports to grow rapidly to boost its economic growth to 8-10 percent, finance ministry economic adviser Arvind Subramanian said at the same IMF conference on Saturday.
(With inputs from Reuters and PTI)