News: 'Indian Govt must cut deficits before free float'

(RTR 31/07/2006) New Delhi - The government needs to cut its fiscal deficits further and strengthen financial regulators before moving towards a freer float of the rupee, an industry lobby group said on Monday.

A six-member committee appointed by the central bank delivered a report on moving towards greater convertibility earlier on Monday and the central bank said the findings would be released "in due course".

However, the Associated Chambers of Commerce and Industry (ASSOCHAM) said India should tread this path with care.

ASSOCHAM president, Anil K. Agarwal, said in a statement India's fiscal deficit must be kept in check with stringent discipline on government spendings.

"The combined fiscal deficit of the centre and states at around 7.7 percent is still a cause of concern while the ratio of public debt to GDP has increased from under 65 percent in 97/98 to over 83 percent in 05/06," the statement said.

Forex and interest rate markets should be liberalised gradually through more sophisticated hedging instruments and steps should also be taken to control money laundering, he said.

The regulators -- the Reserve Bank of India and SEBI -- needed to be strengthened, he added.