By SUDEEP JAIN And ALEX FRANGOS MUMBAI--India's central bank is satisfied with the impact of the measures it took to stem the rupee's slide against the U.S. dollar towards the end of 2011, Governor Duvvuri Subbarao said Monday. In particular, the Reserve Bank of India is satisfied with its moves to curb speculation in the currency markets, Mr. Subbarao said in an interview with The Wall Street Journal. "If you don't intervene, the speculative forces could be self-reinforcing, which is that exporters would defer bringing their receipts in and importers would buy forwards," he said. He didn't comment on when or whether the measures would be rolled back. The RBI barred firms from cancelling and re-booking forward contracts and also placed limits on unhedged currency positions that banks can hold overnight after the rupee plunged to an all-time low of 54.2925 to the dollar on Dec. 15. The trading curbs, coupled with moves by authorities to boost foreign investment and improving global risk appetite, have pushed the rupee 8.0% higher against the dollar this year. Mr. Subbarao also said the government should take steps to rein in its fiscal deficit, saying that the room for not doing so "is non-existent." India had aimed to keep its fiscal deficit to within 4.6% of gross domestic product for the current fiscal year that ends March 31. But it is expected to exceed that target by a wide margin as slowing growth has crimped tax revenues, while government spending has remained high ahead of elections to five state assemblies in the first quarter of the year. Elevated government spending is seen as an obstacle to the RBI's efforts to combat inflation by curbing demand. At its last monetary policy review in January, the RBI had said it would be constrained from lowering rates in the absence of credible fiscal consolidation. However, Mr. Subbarao Monday said all policy options remain on the table for the central bank's next rate-setting meeting scheduled for Mar. 15. The government will presents its budget for the next fiscal year that starts April 1 on Mar. 16. The RBI has raised rates 13 times over the past two years in one of the most aggressive rate-tightening cycles to combat high inflation. Inflation has started to ease over the past few months due to a fall in food prices and a favorable comparison with high price levels in the previous year, igniting hopes of rate cuts. Mr. Subbarao said he expects inflation to continue easing through the fiscal year that starts April 1, but at a gradual pace. Mr. Subbarao also said that India is conforming with the U.N. sanctions on Iran. "As much as we purchase oil from Iran, we have to find a way of paying for it. And our effort is to continue to maintain our payments to Iran," he said. The U.S and the European Union are pushing to ban or discourage Iranian oil exports and depriving the country of a key revenue source as part of efforts to force Tehran into suspending its alleged nuclear weapons program.

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