“I am concerned about the Eurozone crisis and the depreciating rupee as nearly 30 per cent of our exports are to Europe,” he said, adding that growth in advanced countries not up to expectations.
However, he said that exporters can take advantage of the depreciating rupee. “We need to stimulate domestic demand… and in the meantime, we have taken steps which will start yielding results soon,” he said.
Pranab Mukherjee also said that inflation and current account deficit are other factors of concern. “Current inflation is a matter of concern. Supply side cannot be controlled by Monetary Policy,” he said, adding that RBI should adjust the Monetary Policy keeping in mind the situation. The central bank is slated to announce its mid-term monetary policy on Monday.
With WPI inflation still high at 7.55 per cent in April and Q4 GDP growth slowing to 5.3 per cent, India Inc has great expectations of an interest rate cut by the Reserve Bank ranging from 0.25 to 0.50 per cent.
The Finance Minister also spoke about the wider calls for reform from industry and credit rating agencies. Standard & Poor’s recently warned that India may be the first BRIC nation to lose its investment-grade rating.
“As FM I cannot ignore ground reality, apprehensions of Indian industry and credit rating agencies. Have to take serious note of concerns raised by all,” Pranab said.
However, he said that India is passing through a difficult time right now and admitted that there is a negative investor sentiment regarding India. “A difficult situation does not mean we cannot convert this into an opportunity,” he said adding that the country will have to find its own solution.
“India second fastest growing economy amongst the BRIC countries. Our industry has the resilience,” he added.
In order to give relief to customers reeling under high prices of petrol, Finance Minister said Centre is willing to temporarily cut duties if the states agree to take similar steps.
"... I have suggested to them (states chief ministers) that if you agree to reduce the tax burden temporarily say till crude prices come to $90 per barrel, Union government is ready to reduce duties," he said at an Assocham conference on financial sector here.
Mukherjee further said central and state taxes account for 50 per cent of the price which retailers pay.
Pointing out that taxes on petroleum products are an important source of revenue for the Centre and the states, the Minister said, "When situation is difficult, difficulties have to be shared by all stakeholders. It cannot be passed on to only one stakeholder; otherwise there will be serious distortions."
Last month, Oil Marketing Companies (OMCs) had raised prices of petrol by Rs 7.54-per-litre in view of the rising prices of crude in the international market and rupee depreciation.
Later, on June 3 the oil firms had cut petrol rates by Rs 2.02 a litre.
There is likelihood of further cut in prices as the international crude oil price for Indian basket declined to USD 95.97 per barrel on June 14.
With inputs from Press Trust of India