News: 'Rupee convertibility not before 2009'

(UNI 07/04/2006) New Delhi - Ruling out capital account convertibility before 2009 and a rise in the interest rates, the Finance Minister, Mr P Chidambaram sought to allay apprehensions that the proposed labour reforms would result in 'hire and fire' and expressed confide nce about India hitting double digit economic growth, fuelled by higher farm output and growing investment.

Dwelling at length on fiscal and trade and economic issues in an interview to 'The Straits Times', the Finance Minister indicated that there would not be any change in the personal and corporate tax structure and said no market 'bubble' had been brought to his notice in the light of the soaring Sensex.

Strongly defending the steep duty cuts for small car manufacturers, which promptly responded by slashing prices, Mr Chidambaram said that the move was aimed at improving transportation in rural areas.

Ruling out a free trade agreement (FTA) with China in the near future, the Minister said that the Government would first wait for a rise in the bilateral trade with Beijing.

Asked how long would it take for rupee convertibility, he said it would have to wait until the revenue deficit was wiped out and the fiscal deficit brought down to three per cent. "Which means, not earlier than 2009," he added.

Further, he was not sure what the S S Tarapore committee, appointed to suggest a roadmap by July this year, would recommend. "I don't think, in any event, we will be ready until the fiscal goals were met".

Mr Chidambaram said that he did not expect corporate lending rate to even touch banks' prime lending rate (BPLR) and felt that the RBI was likely to take steps to inject greater liquidity, easing liquidity conditions.