Chidambaram says to take measures to moderate inflows if necessary

[K.Karthik Raja]

Chidambaram says to take measures to moderate inflows if necessary
Monday, Mar 10

NEW DELHI - The government and the Reserve Bank of India may take
temporary measures to moderate capital flows if needed, Finance
Minister P. Chidambaram has said.
"Government will, in consultation with the RBI, continue to
monitor the situation closely and take such temporary measures as may
be necessary to modulate the capital flows consistent with the
objective of monetary and financial stability," Chidambaram had said
in a written reply in Lok Sabha dated Mar 7.
The finance minister said though interest rate differential
between
countries was one of the factors influencing capital flows, the
strength of the fundamentals of the economy was also crucial in
attracting capital. "To the extent that interest rate differentials
influence flow of capital across borders, there is possibility of
increase in capital flows into the country," he said.
The interest rate differential between India and the U.S. has
widened
after the Federal Reserve cut interest rates successively since 2007
in a bid to counter recessionary trends in the U.S.
The Indian government has taken steps including curbing
investments through Participatory Notes to moderate capital flows into
the country.
Of late, capital flows into the country have been volatile. In
February,
India attracted a net foreign institutional investment of $1.83 bln
compared with a net outflow of $3.78 bln in January.


K.Karthik Raja
www.kences1.blogspot.com