India on Tuesday approved 36 infrastructure projects, including 18 power projects, worth some $28 billion in a bid to jumpstart the economy and restore investor confidence after the rupee – Asia’s worst performing currency – crashed to record lows this month.
"The message that we are sending is that the investment cycle has restarted, and we are pushing it. It is gathering pace and bottlenecks are being cleared" Finance Minister P. Chidambaram told a news conference yesterday.
36 stalled projects in oil, gas, power, road and railway sectors were cleared by the Cabinet Committee on Investment headed by Prime Minister Manmohan Singh, which was formed in late December to fast-track approvals and ease growth bottlenecks.
The petroleum and natural gas projects, valued at 830 billion rupees ($12.6 billion), are urgently needed to reduce a crippling electricity shortfall. India’s chronic power shortage is often cited as a key reason for lacklustre growth in Asia's third-largest economy, which slowed to a decade-low of five percent last year.
The announcement came as the rupee slipped to a new record low of 66.07 rupees to the dollar amid foreign investor alarm over the nation's current account deficit and a weak economic outlook.
Analysts say the fall was in part due to concerns over parliamentary approval on Monday of a $22 billion food security bill, an ambitious plan to provide cheap grains to India’s poor, which investors fear will increase the burden on India’s already stretched public finances.
"It's not out of choice, but out of compulsion that the finance minister is announcing so many things," said G. Chokkalingam, managing director and chief investment officer of Centrum Wealth Management in Mumbai.
"The trinity of the fiscal deficit, slowing growth and an unstable currency is hitting us badly. In addition to these, the government has passed the food security bill which may put fear in the mind of rating agencies."
On Tuesday, Chidambaram said that the rupee had "overshot its true level", and stressed that the food security bill would not lead to the government overshooting its fiscal deficit target.
"As I said in parliament, every emerging market is challenged today. So, India is also challenged, and the impact is felt both on the equity market as well as the currency market," he said.
"I think we'll simply have to be patient, be firm, do whatever is required to be done, and the rupee will find its appropriate level. What I said a few days ago, I still maintain it. The rupee has overshot its true level, it's undervalued. Others have confirmed it. And we have to be patient and we have to be firm and we have to do what requires to be done."