The meltdown in the eurozone, due to debt crisis, has started having an impact on the Indian economy and markets as Finance Minister, Pranab Mukherjee, while expressing concern over the rapid pullout of FII money, said the outflow was mainly driven by the eurozone crisis and it was impacting the stock markets.
“The current volatility in the stock market and withdrawal of FIIs has a direct correlation with the eurozone crisis. It will have some impact, particularly on FII flows,’’ Mr. Mukherjee said while addressing the Hindustan Times Leadership Summit in Delhi.
However, he said in India, the foreign direct investment (FDI) inflows had gone up so far this year. “Up to now, the indication is that FDI inflow is much better compared to last year, but FII outflow is an area of concern,’’ he added. Foreign funds withdrew over Rs. 3,200 crore from the Indian securities market in the month of November amid concerns over the worsening debt crisis in the eurozone. The stock markets have witnessed sharp volatility in recent times due to depreciation of rupee and withdrawal of funds by FIIs.
With respect to FDI investment inflows, during the April-September period, FDI went up by about 74 per cent to $19.13 billion from $11 billion in the year-ago period as inflows were robust in the initial months of the fiscal.
The Finance Minister said if India can continue to grow and acquire economic stake, the country would be a source of stability for the world economy that provides safe havens for restless global capital.
“This would also enable us to grow faster,’’ he added. At the same time, he indicated that Reserve Bank of India (RBI) will adjust policy rates in tune with the price situation. “These are all weekly (inflation figures). Monthly figure is yet to come. RBI is watching the situation. As and when they will consider necessary, they will adjust the monetary policy. That is their job and they are doing it efficiently and effectively,’’ the Finance Minister later told reporters.
“I would not like to make any comment on rate revision right now. Only point I shall have to emphasise on is that this declining trend we shall have to watch for a longer period of time, not on a weekly basis,’’ he said.
