Indian finance minister says fundamentals improved in 2013, threat of downgrade lessened

NEW DELHI – India’s finance minister said Monday that the fundamentals of Asia’s third-largest economy have strengthened since the country faced a potential crisis last year.

Palaniappan Chidambaram told reporters that the worrisome current account deficit had narrowed to about $35 billion in the fiscal year that ended Monday from $60 billion the previous year, thanks to increased exports and also government curbs on gold imports. The fiscal deficit dropped to 4.6 per cent of gross domestic product and foreign exchange reserves grew to $300 billion.

The improvements had lessened the threat of a downgrade from investor rating agencies, he said.

“The economy is more stable. No one talks about a downgrade any more. The fundamentals have strengthened,” Chidambaram told reporters in the capital.

The Indian rupee strengthened last week to an 8-month high after spiraling to a lifetime low of more than 68 per dollar in August.

Still, India is struggling to revive its once-strong economic growth rate. The first three quarters of fiscal year 2013-14 had expansion rates of less than 5 per cent, down from a decade of 8 per cent or better growth.

The slowing economic expansion and high inflation are key issues in the elections beginning next week in India, the world’s largest democracy with more than 1.2 billion people.

The current government led by the Congress party appears set to lose seats in the lower house of parliament as the opposition Bharatiya Janata Party has been campaigning on the promise it has the know-how to turn around the economy.