NEW DELHI, Aug. 30 (UPI) -- Indian Prime Minister Manmohan Singh said Friday the government will act to reduce current account deficit, blamed for the sharp fall in the value of the rupee.
Speaking in Parliament even as the country's economy faces a tough situation due to various factors including growing deficits, stubbornly high inflation and a declining currency, Singh said it is important to recognize that the fundamentals of the Indian economy continue to be strong, the government reported on its website.
"The rupee has depreciated sharply against the dollar since the last week of May. There are concerns, and justifiably so, of the impact this would have on our economy," he said.
Blaming the fall on both domestic and global factors such as the tensions over Syria, Singh said they have caused the reversal of capital flows to emerging economies. He said the rupee has been "especially hit" because of India's large current account deficit and other domestic factors.
"We intend to act to reduce the current account deficit and bring about an improvement in the economy," Singh said. The current account is the broadest measure of a country's trade with other nations and a deficit results when money spent on imports of goods and services and money transfers exceed receipts from exports and financial transfers.
The rupee, lately among the worst performing currencies in the world, has lost 20 percent of its value this year. India's once-highly touted economic growth rate plunged to a decade low of 5 percent last year.
Singh said the government's medium term objective is to reduce the CAD to 2.5 percent of the gross domestic product. He also said the government will make every effort to maintain a macro economic framework friendly to foreign capital inflows.