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RBI chief says India can fund c/a deficit without running down reserves

MUMBAI (Reuters) - Reserve Bank of India Governor Raghuram Rajan said on Friday that he was confident that the current account deficit could be financed this year without suffering a substantial drawdown in foreign exchange reserves.

India needs to withdraw liquidity measures, introduced in July to stabilise the rupee, as soon as market conditions allow, Rajan told a press conference after conducting his first policy review since becoming governor.

Rajan surprised markets by raising interest rates to ward off rising inflation while scaling back some emergency measures put in place to support the ailing rupee.

India's foreign exchange reserves fell to $274.806 billion as of September 6, compared with $275.49 billion in the earlier week.

The country's record-high current account deficit has made it especially vulnerable to the flight of funds.

(Reporting by Archana Narayanan; Editing by Simon Cameron-Moore)