NEW DELHI: India’s Prime Minister, Manmohan Singh, has made a rare speech in parliament in an attempt to restore investors’ confidence in the Indian economy and halt the slide of the rupee.

Singh, an economist credited with leading a crucial wave of reforms in the early 1990s but recently widely criticised for inactivity, said India was not facing a repeat of a balance of payments crisis that shook the country in 1991 and said fears that economic growth could slip to as low as three per cent were unfounded.

“There is no reason for anybody to believe that we are going down the hill and that 1991 is on the horizon,” he told parliament.

Indian officials have repeatedly blamed international factors for the rupee’s sharp decline over the last three months, though many local commentators say the main reason is the government’s failure to push through reforms. Some analysts have raised the prospect of India seeking help from the International Monetary Fund.

On Friday the rupee was trading for around 102 to the British pound and 66 to the US dollar, a decrease of around 20 per cent in two months.

Populist measures such as a massive new expansion of the country’s inefficient $14bn food subsidy programme, enshrined in law this week, have also worried international markets. Few analysts believe the government will take tough and potentially vote-losing financial decisions before an election due next spring.

Long-awaited legislation giving greater protection to communities whose land is bought by the state or private enterprises was passed in the lower house of parliament on Thursday night. It raises compensation for landowners and was opposed by the business community.

“We believe that the land bill strikes a fair balance,” said the finance minister, P Chidambaram. “Land has to be made available, but while land is being either purchased or acquired to make land available for industry, we must also keep in mind that those who are deprived of land are in most cases deprived of the only asset they have.”

However, Rajeev Kumar, an economist at the Centre for Policy Research, a Delhi think tank, said the law would be counter-productive. “No one is saying the farmers shouldn’t get a fair price for their land but this just makes [the process of acquisition and compensation] much more complicated and will cut down investment,” he said.

In his speech, Singh referred briefly to India’s large current account deficit and “some other domestic factors” that had contributed to the rupee’s fall. However, the prime minister told parliamentarians the slide was also down to an expected tapering of the US Federal Reserve’s liquidity measures, which would limit cheap capital available for investment in emerging economies like India’s, and accused “foreign exchange markets” of overreacting.

The 80-year-old, who has been prime minister since 2004, said rich countries should pay more attention to the impact of their policy steps on developing economies. “In a more equitable world order, it is only appropriate that the developed countries — in pursuing their fiscal and monetary policies — should take into account the repercussions on the economy of emerging countries,” he said.

Local commentators have been harsh in their criticism of the tendency of the government — a coalition led by the Congress party — to avoid taking responsibility for India’s economic problems.

“To be sure, external factors have contributed and all emerging markets, including India, have been hit, but Singh’s government hasn’t exactly earned plaudits for its governance of the economy,” said an editorial in Mint, a local financial newspaper.

The newspaper blamed “rash spending, misplaced policies, unstable tax laws, and the absence of efforts to build infrastructure and capacity and also make Indian exports competitive”. These, it said, “have all played a part in bringing the India story to a premature end”.

After years of growth of eight to 10 per cent, the Indian economy began to slow in 2010. It is believed to have expanded by around five per cent in the 2012-13 fiscal year. A good monsoon has helped in recent months.

Kumar said the government needed to “admit its mistakes and give up politicking” to restore international credibility. “Any inaction now will have a major impact in the future. They can’t just try and tide things over for six months until after an election,” he said.

By arrangement with the Guardian