Seeking to allay fears in the wake of the economic problems in the U.S., Finance Minister Pranab Mukherjee on Monday said India’s fundamentals are strong and the country is in a better position than other nations to meet the challenge although there could be some impact.
Mr. Mukherjee said the country could see faster and greater FII inflows unlike after 2008 meltdown in view of the higher returns that global investors could get in India and that implementation of pending reforms could be fast tracked.
“The recent developments in the U.S. and the Eurozone have injected certain uncertainty in global markets. These developments could have some impact on India. But as India’s growth story is intact and its fundamentals strong, we are in a better position than many other nations to manage the challenge,” Mr. Mukherjee told reporters outside Parliament House.
He said there could be “some impact” on capital and trade flows “but as India’s growth story is strong we could see FIIs viewing India as an attractive investment destination even if there is any temporary outflow”.
Mr. Mukherjee asserted that India’s institutions are strong and “We are prepared to address any concern that may arise on account of the present situation”.
Mr. Mukherjee’s observations, sounding a note of optimism, came amidst a sharp fall in the stock markets apparently in view of the downgrading of the U.S. economy by Standard and Poor.
Insisting that India’s economic fundamentals are sound, the minister said the government would also focus on encouraging greater domestic consumption and giving greater impetus to the drivers of domestic growth.
“The government will fast track the implementation of pending reforms and keep a close eye on international developments,” Mr. Mukherjee said.
He said softening of the international commodity prices, especially fuel oil, will help check inflationary pressures in the economy.
“It will also help in maintaining the fiscal balance for the year 2011-12,” he said.
Mr. Mukherjee also mentioned about the steps being taken by RBI to deal with the problem.
“The most important part of the RBI statement is that in the immediate future the Reserve Bank priority is to ensure that adequate rupee and foreign exchange liquidity are maintained in domestic markets to prevent excessive volatility in the interest rates and exchange rates,” he said, adding, “this is very much reassuring“.
The Finance Minister also spelt out views expressed by G-20 Finance Ministers and Central Bank Governors.
“We, the Finance Ministers and Central Bank Governors of G-20, affirm our commitment to take all necessary initiative in a coordinated way to support financial stability and to foster stronger economic growth in a spirit of cooperation and confidence…
”…We will remain in close contact throughout the coming week and cooperate as appropriate, ready to take action to ensure financial stability and liquidity in financial markets.
” Moreover, we will continue to work intensively to achieve concrete results in support of strong, sustainable and balanced growth in the context of G-20 framework on growth,” the finance minister said. Hindu