Raghuram Rajan, chief economic advisor in the finance ministry, said the government would shortly take specific steps for funding the current account deficit (CAD) on a sustainable basis.
"We have already taken some steps on liberalising FDI (foreign direct investment). We are also exploring some other options for stably and sustainably funding CAD. We will announce specific measures in the next few weeks," he told reporters.
The government is also considering measures to curb some non-essential imports. In a meeting with the Prime Minister Manmohan Singh on Monday, industry had suggested a higher import duty on luxury goods. Finance Minister P Chidambaram is holding a press conference on Wednesday and is expected to announce some measures.
"Even as the Reserve Bank of India (RBI) does what it needs to do, the government is exploring ways to reduce CAD, including measures to reduce imports and measures to incentivise or expand exports," said Rajan, adding all options were being considered on an urgent footing.
The rupee breached the 60-mark against the dollar after RBI maintained status quo on rates in its quarterly review and said a sovereign bond was not a feasible option for now.
"We are not defending any particular level of the rupee. We associate stability with lower volatility. Market participants should believe that the rupee is stable," he said in response to a query.
Rajan exuded confidence that the CAD would be brought down significantly in the current financial year, regardless of the growth of the outside world, and if the recovery is stronger in the US and the UK, India's CAD would come down even faster.
Commenting on the monetary policy review, he said the central bank saw the main immediate macroeconomic task as stablising the rupee, and once that happens, there would be room for more growth-friendly steps.
Rajan also tried to emphasise that the finance ministry and the central bank were on the same page and working together to achieve stability and growth.
"The government and RBI are firmly convinced of the need to do what it takes to stabilise the rupee, and we see this as being friendly to growth over the medium term. No one should doubt our resolve in this matter," he explained, adding RBI has a plenty of ammunition to deal with the situation.