Don’t panic, Indian economy fundamentally strong: Mukherjee

August 8th, 2011 - 3:51 pm ICT by IANS  

Pranab Mukherjee New Delhi, Aug 8 (IANS) Even as global stock markets continued to lose heavily over the US sovereign debt downgrade, policymakers in India sought to reassure investors that the crisis will not affect the country much and that it will continue to grow.

Finance Minister Pranab Mukherjee assured the global investing community that the Indian government will push economic reforms forward even as strong fundamentals will ensure flow of capital to growth areas.

“The recent developments in the US and the Eurozone have injected certain uncertainty in global markets. These developments could have some impact on India,” the finance minister said in a statement.

“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,” he said, after a key index of Indian equities had seen a dip of nearly 550 points or 3.15 percent intra-day.

The downfall in global markets continued Monday after top credit rating agency Standard and Poor’s downgraded the US sovereign debt rating last Friday and cautioned of a further downgrade if the fiscal position of the country did not improve.

The news sparked off a panic sell-off in stock markets across the world.

The finance minister also drew a silver lining for India saying that the crisis could result in softening of international commodity prices, especially fuel which would help rein in inflation.

India meets about 80 percent of its fuel needs through imports and has been dealing with high inflation since last two years.

“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.

Mukherjee, however, admitted that the crisis could result in some impact in the short-term on capital and trade flows into India, but it was also likely that the country could end up benefiting from the economic woes of other developed economies.

“As India’s growth story is strong we could see foreign institutional investors seeing India as an attractive investment destination even if there is any temporary outflow,” said the finance minister.

“In addition, we could rather see faster and greater FII inflows unlike after 2008 in view of the higher returns that global investors could get in India,” he said, adding that the macro-view of the economy continued to be strong.

“I would like to repeat that our economic fundamentals are sound. We would also focus on encouraging greater domestic consumption and give impetus to the drivers of domestic growth,” he said.

“The government will fast-track the implementation of pending reforms and keep a close eye on international developments.

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