MUMBAI (AFP) – India's rupee firmed against the dollar on Friday, a day after a government advisor said steps were being taken to boost growth and reduce the high current account deficit.
The rupee -- the worst performing currency this year among major Asian nations -- rose to 58.66 against the dollar on Friday morning, up from its lifetime low of 61.21 hit earlier this month.
India's chief economic advisor Raghuram Rajan told media Thursday that the government was taking measures to boost growth, stabilise the currency and lower the current account deficit.
The rupee slide comes when India's economic growth is at its weakest level in a decade and the current account deficit, the broadest measure of trade, is at a record 4.8 percent of GDP.
The high deficit stems mainly from huge oil and gold imports and weak exports.
But Rajan said that there was "absolutely no intent to kill growth. We are trying to stabilise the currency in a way that does the minimal damage to growth."
"A number of measures are being taken to get the growth going. We need to act directly on the current account deficit side," Rajan said, according to The Press Trust of India.
This month the Reserve Bank of India (RBI) raised short-term interest rates and announced liquidity tightening measures including lowering the amount banks can borrow or lend under its daily liquidity limit.
The rupee has been hit by a flight of capital due to India's weak economy and the growing attraction of the United States to investors on expectations of a scaled back US stimulus package.
The rupee's tumble has raised import prices of everything from oil and fertilisers to food staples such as pulses, stoking already high consumer inflation and causing hardship for India's poor millions.
Rajan's comments "are indeed, what markets would like to hear", said Credit Agricole's senior Asia economist Dariusz Kowalczyk on Friday in a note to clients.
But Kowalczyk warned the RBI tightening measures were a "mistake" that had "substantially damaged short-term growth prospects".
Investors and economists now await a decision from the RBI on monetary policy next week, when it is widely expected to keep interest rates on hold.