Finance Minister P. Chidambaram attributed the sharp fall in the Sensex on Friday to global developments and hoped that calm would be restored soon.
Following a series of measures to contain the current account deficit, the Finance Ministry ruled out any further import curbs. It also ruled out a return to the capital control regime, fears of which had spooked the stock market and sent the rupee plunging to a new low.
Speaking to reporters, Chidambaram said: “I have no doubt that when calm is restored in the market, people will begin to understand that Indian market indicators must basically reflect Indian market conditions. They should not be so sensitive to data coming out of the US.” He was referring to the US data on reduction in applications for jobless benefits and increase in consumer prices. These two data indicate the likelihood of the beginning of economic recovery. If this happens, then quantitative easing (buying of bonds by the US Federal Reserve) may be phased out earlier than predicted.
Chidambaram said the fundamentals of the Indian economy had not changed, and asked investors to wait for the April-June quarter growth numbers that are due at the end of the month.
No capital control
Earlier, Economic Affairs Secretary Arvind Mayaram said, “Gold, silver and platinum are what we believe are non-essentials. We have put curbs on that. I don’t think we need any more curbs.”
Mayaram also felt that measures announced by the Reserve Bank of India to rationalise foreign exchange outflow by resident Indians had been ‘misinterpreted’ and ‘not transmitted properly’ in the stock market.
“These are not capital control measures. Only the methods have been changed. Anyone who wants to invest, can invest.”
He said, “There is no question of us putting any restriction on outflows, which are commercial in nature,” he said. “There is no control on outflows of dividends, profits, royalties or any kind of commercial outflows that happen in the normal course… Whenever required, policy initiatives will be taken with a view to creating a stable environment for the rupee. We will see when this is required, and will take appropriate measures.”