"The volatility of the rupee is still a matter of concern. And in the context of the current account deficit and going by the slow exports growth, (this) clearly demands that we must diversify our export destination and also our export basket," Mukherjee told the annual general body meeting of the Indian Banks Association (IBA) here this evening.
However, he noted that on the positive side, there has been a sharp fall in the oil prices, which should help the country bring down its huge trade deficit. The trade deficit stood at USD 190 billion last fiscal, primarily driven by crude and gold imports. The oil import bill touched USD 155.6 billion last fiscal while the value of gold imports crossed USD 66.1 billion. Deflecting criticism aimed at the government for slow economic growth, Mukherjee said the global environment is not friendly and accommodative, adding that the events in the Eurozone area are worrisome.
"Everyone is waiting to see the outcome of the Greece election tomorrow as to whether the reformist will get the mandate or not," he said. On the forthcoming monetary policy review by the RBI, he said, "in its policy formulation, the RBI should keep in mind the state of the economy, widening CAD, slowing growth and fiscal deficit. The RBI is one of the well-reputed international regulators, and it will take right decision at the right time," he said.
On criticism over policy inertia, which has been widely cited for the massive dip in GDP, which fell to a nine-year low last fiscal to 6.5 per cent, Mukherjee pointed out that there are some silver-linings on the horizon too, saying "oil prices have started to come down. Somethings have started improving. The Reserve Bank has reduced the interest rates, the mining sector has shown signs of improvement. Progress also been made in giving coal linkage to power projects and oil prices have also come down. But, volatility in the rupee is a matter of concern."