Faced with sliding rupee, finance minister P. Chidambaram Wednesday said government would further liberalise the FDI policy and encourage public sector undertakings to raise funds from overseas markets.

Addressing media on completion of one year as finance minister, Chidambaram exuded confidence that economy would record a growth rate of 5.5 to six per cent in the current fiscal, up from five per cent a year ago.

Chidambaram, who took charge of the ministry on August 1 last year, said the government was also looking at raising import duty on non-essential luxury items and promoting exports to contain current account deficit (CAD), which had soared to a high of 4.8 per cent of the GDP last fiscal.

“We are looking at some compression in non-oil and non-gold import to curb demand for non-essential luxury items,” Chidambaram said.

The other steps being considered by the government to deal with the CAD include relaxing the external commercial borrowing (ECB) norms, attracting investments from sovereign wealth and pension funds and NRI deposits.

Replying to questions on rupee, the minister said though he did not have fixed target in mind but he would endeavour to check volatility and end speculative trades on the domestic currency.

The rupee slipped to the near record low level of 61.21 to a dollar in early trade Wednesday. It was trading at 61.20 but later recovered to 60.94 to a dollar.

On the possibility of a sovereign bond issue to raise forex, Chidambaram said, “that is an option on the table but I will not rush into any decision.”

The government recently relaxed the FDI policy raising the caps in several sectors and permitting foreign investment in many others under the automatic route.

Elaborating on compression on imports, Chidambaram said that officials were preparing a list of non-essential goods with a view to limit their inward shipments.

Specifically mentioning coal and electronic hardware, Chidambaram said, “Electronic hardware can be manufactured in states like Rajasthan and Kerala.”

On giving further extension to RBI governor D. Subbarao, Chidambaram said that he had expressed his desire to move on and the government has started looking for new central bank head.

The term of Subbarao as RBI governor ends on September 4.

As regards the economy, Chidambaram said, “I am confident that we will take the Indian economy one rung higher in 2013-14. We are looking forward to a growth rate between 5.5-6 per cent and we will take all measures to achieve that goal.”

The minister, however, underlined the need for reviving investor sentiment and emphasised that “industry must play its part.”

Industrial houses, Chidambaram added, “appear to be confident when they decide to invest abroad, the same confidence must be exhibited in order to invest in India. The price of credit is indeed high, but it is not so dauntingly high that it should hold back investment.”

The RBI policy announced Tuesday, Chidambaram said, hinted at easing of interest rates once the rupee stabilises and volatility in the currency market is reduced.

The government, the minister said, would achieve targets with regard to fiscal and revenue deficits and disinvestment of state-owned companies.

“This year I promise we will tackle both (fiscal and revenue) deficits. The target for fiscal deficit is 4.8 per cent of GDP. It is a red line and it will not be breached under any circumstances,” Chidambaram said.

As far as CAD is concerned, the minister said, “Some more steps that are on the anvil. We expect that we will be able to fully finance the CAD this year too and we will not be obliged to draw down on reserves.”

Chidambaram further said that even without the additional measures, the inflows would be well above $80 billion, sufficient to finance comfortably the CAD.

The government took some strong measures to contain the import of gold, Chidambaram said, adding in June it was down to 31 million tonnes but went up to 45 million tonnes in July. However, the import in June and July in the current fiscal is less than what was recorded in corresponding months last year.

“We hope to contain gold imports at a level of well below last year’s total imports of 845 million tonnes and save a considerable amount of foreign exchange which will have a positive impact on CAD,” Chidambaram added.

On the question of floating a sovereign bond, the minister said the option was on the table but the government would not rush into taking any decision.