India can weather global crisis: FM

In the face of uncertainty after US downgrade, govt says implementation of pending reforms could be fast-tracked

New Delhi, August 8
Seeking to allay fears in the wake of the economic problems in the US, Finance Minister Pranab Mukherjee on Monday said India’s fundamentals were strong and the country was in a better position than other countries to face the situation, although there could be some impact.
Mukherjee said the country could see faster and greater FII inflows unlike after the 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 US 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,” stated Mukherjee. 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”.
Mukherjee asserted that India’s institutions were strong. “We are prepared to address any concern that may arise on account of the present situation.” These observations, sounding a note of optimism, came amidst a sharp fall in the stock markets apparently in view of the downgrading of the US economy by Standard and Poor.
“The government will fast track the implementation of pending reforms and keep a close eye on international developments,” 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.
“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.

NO BIG IMPACT

The high growth of Indian economy is largely driven by internal factors. I feel the market will stabilise in the short-run. I don't expect to see a big negative impact but we have to watch the situation.
— Montek Singh Ahluwalia, Deputy Chairman, Planning Commission

INFLATION TO DAMPEN

It (falling global crude prices) will have a dampening effect on inflation. We all have to watch and see how long that will take as a part of the international commodity prices has to do with the buoyancy of Indian and Chinese economies (as well).
— Kaushik Basu, Chief Economic Adviser

US RECOVERY NEEDS WATCHING

More than the downgrade, what will be impact the rest of the world will be the slow pace of recovery in the US.
— C Rangarajan, Prime Minister’s Economic Advisory Council Chairman

Sensex ends below 17,000

The mayhem in the global financial markets, triggered by downgrade of the US creditworthiness, hit the Indian stocks hard today and sent the BSE Sensex spiralling down 316 points to below the 17,000-level for the first time in 14 months. Although the Sensex partly recovered intra-day losses of nearly 550 points, it still lost 315.69 points and closed at 16,990.18 — the lowest level since June 10, 2010.