The finance ministry today indicated it will not intervene in the foreign exchange market even if capital inflow into the country touches USD 50 billion during the 2010-11 fiscal.
“USD 50 billion ...you could have around that. Inflows will continue according to me,” Thomas Matthew, joint secretary in Ministry of Finance, told reporters on the sidelines of a conference on corporate governance.
Mathew said in reply to a query on whether the capital inflows could exceed USD 50 billion in the current fiscal as in the previous financial year.
Foreign Inflows during the April-September period stood at USD 37.4 billion.
On the possibility of government or the Reserve Bank of India intervening in the market to check surge in capital flows, Matthew said, “The Finance Minister (Pranab Mukherjee) has already said there is no need to interfere in the market.”
The surge in capital flows, according to the Mid-Year Analysis prepared by the Finance Ministry, is fueling stock markets and putting pressure on rupee.
“The main implication of such large capital flows to India has been buoyancy in stock markets and appreciation of rupee vis-a-vis dollar,” it had said.
The capital flows have remained volatile in the past couple of years. It went up to USD 108 billion in 2007-08 before nose-diving to a mere USD 8 billion in 2008-09, mainly on account of the global financial meltdown.
The inflows, however, picked up during 2009-10 rising to USD 53.6 billion.