Aim is to tame inflation, contain fiscal deficit and cut current account deficit

Finance Minister Pranab Mukherjee on Wednesday asserted that the government would successfully overcome the current economic challenges as its efforts were aimed at taming inflation, containing the fiscal deficit and reducing the current account deficit (CAD) to an acceptable level.

“I have full faith in the resilience of the Indian economy and am sure that we will be able to overcome the current economic challenges successfully as we have done in the past, many times …,” Mr. Mukherjee said addressing IES (Indian Economic Service) probationary officers at his North Block office here.

The Minister's statement, which referred to the economy also facing “some challenges” due to the ongoing crisis in the Eurozone, came on a day when the rupee plunged further and touched a new low at 56.22 before recovering to 56 against the U.S. dollar at close following multiple interventions by the Reserve Bank of India.

In the present-day environment at home and abroad, the Indian economy's resilience will be put to a severe test in the weeks ahead as it is currently faced with a triple whammy. While an increasing trade gap, coupled with a massive outflow of forex owing to sell-off by foreign institutional investors on the bourses — as a consequence of the Greek debt crisis — has been leading to a widening CAD, the rupee has been in free fall mode ever since.

Obviously referring to this dilemma on diesel price hike and other reforms, Mr. Mukherjee told the IES officers that “as a ruling party we have to carry all partners with us and that's why it sometimes takes little longer. But at the end we are able to take decisions and implement them.”

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