Government monitoring foreign capital impact: Mukherjee

December 24th, 2010 - 8:00 pm ICT by IANS  

Pranab Mukherjee New Delhi, Dec 24 (IANS) The government is constantly monitoring the impact of foreign capital inflows on exchange rates and there was no need to press the panic button, Finance Minister Pranab Mukherjee said Friday. “So far, foreign capital flows are well within the absorptive capacity of our economy and exchange rate and monetary management has not been unduly challenged,” Mukherjee said at the 105th Annual General Body Meeting of the PHD Chamber of Commerce here.

Foreign institutional investors (FIIs) pumped in $38.5 billion in the Indian capital market during January-November 2010 period.

The finance minister said the government remained vigilant as any sharp variation might affect exchange rate and monetary management. “This can change at short notice, we have to be alert and monitor the developments constantly.”

Mukherjee said rising oil and commodity prices pose a serious challenge to the Indian economy.

“The creeping increase in international crude oil and other commodity prices is a reality that we are already confronting. The oil marketing companies have had to hike the petroleum product prices earlier this month,” he said.

“There are also domestic supply side pressures on food prices that we have been grappling with for the past several months,” he added.

Crude oil price soared to $94.74 a barrel (159 litres) Friday, the highest level since October 2008.

On economic growth, Mukherjee said 8.9 percent GDP growth during the first two quarters of fiscal 2010-11 indicates that the Indian economy has become resilient to both external and domestic shocks even though the global economic recovery remains fragile.

“The recovery has been broad based with agriculture, industry and services all contributing to the consolidation of the growth process,” he said.

He pointed out that the agriculture sector grew 2.5 percent and 4.4 percent during the first and second quarters of the current fiscal against a mere 0.2 percent growth in the last financial year. Services sector expanded 9 percent in the first half of the year.

“Sustained expansion in capital goods and consumer durables segments is a visible indication of the pick-up in industrial activity and also suggests an improvement in investment and business confidence,” he said.

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