Finance Secretary Ashok Chawla on Wednesday maintained that the surge in inflows of foreign capital, especially into the country’s equity markets, was not a cause for concern at the moment and did not call for any specific measures to stem the trend.
“As of now, it is not a cause for concern...We don’t see any need for any specific action in this regard,” Mr. Chawla told the media on the sidelines of a function here.
Following the early signs of recovery from the impact of the global financial crisis and the prospects of higher growth in the coming months, foreign inflows have turned positive with FIIs (foreign institutional investors) flocking to Indian stock markets.
Even as FIIs have turned net buyers of stocks worth nearly Rs. 75,000 crore during the current fiscal — after having sold scrips worth about Rs. 37,520 crore on net basis in the same period — Mr. Chawla asserted that the situation was under close scrutiny by the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India.
“We are watching the situation while the RBI and SEBI are seeing what is happening in terms of inflows and equity markets,” he said.
With the rise in foreign capital inflows, the rupee has been appreciating against the globally weak dollar and, as a consequence, the exporting community is facing a further hit on margins on top of the slack demand in international markets.
Mr. Chawla noted that despite the initial signals of recovery, the turnaround in GDP growth was not robust as yet.
Besides, getting back to the high growth trajectory of 8-9 per cent would not be possible without a pick-up in the country’s exports, And for this, a robust recovery in the global economy would be essential.
To a query on the lack of robust investment in sectors such as pension and insurance, the Finance Secretary said that appropriate steps would be taken to strengthen the financial sector.
“This is something which is part of the overall policy direction of the government ... So, there will be steps in terms of where there is legislation required, legislation will be brought before Parliament, where there are procedural and executive steps to be taken, those will be taken,” he said.
The government was looking to strengthen the High Level Coordination Committee (HLCC) on financial markets to make it more broadbased and effective to deal with issues in the financial sector, Mr. Chawla said on the sidelines of a seminar hosted by economic think tank ICRIER.