Even as investors were getting battered on the bourses on Friday on fears of yet another global turmoil in the wake of the debt crisis in the U.S. and the Eurozone, Finance Minister Pranab Mukherjee maintained that India's economic fundamentals were strong and its growth story remained intact.
In a statement after going into a huddle and reviewing the country's economic scenario with Reserve Bank of India Governor D. Subbarao and Prime Minister's Economic Advisory Council (PMEAC) Chairman C. Rangarajan to take stock of the mayhem in the markets, Mr. Mukherjee said: “Its [India's] fundamentals are strong and they look more attractive in a world confronting problems”.
Despite the official assurance, however, the Bombay Stock Exchange's benchmark Sensex slumped to a 15-month low on panic selling, mainly led by foreign institutional investors (FIIs). In the bargain, the all-round sell-off over the last two trading sessions led to erosion of over Rs.2-lakh crore in investor wealth. The Finance Ministry statement asserted that as compared to the sharp fall witnessed in markets in the U.S. and Europe, the Indian indices have “weathered any contagion effect”. “Today, Indian markets contracted by 1.9 per cent which is only around one-third of the fall seen in the U.S. and European markets. In comparison to Asian markets also, our performance has been better. Some of the major Asian markets saw 4-6 per cent losses,” it said.
Indian markets, the statement thus argued, have not been as bad as other bourses in Asia and is well positioned to absorb the potential foreign fund inflows. “As the advanced economies grapple with their problems, India is better positioned than most other nations to meet its problems,” it said.
Pointing to India's upgrade by global investment bank such as Goldman Sachs to ‘market weight' from ‘underweight', the statement said “this is a testimony to the strength of the Indian economy”, and went on to note that the crisis in the Western world presents an opportunity for India to attract investments from foreign funds. “The present crisis can be expected to encourage increase in the equity exposure by foreign pension funds and other long term institutional investors. India is well-positioned to capture this flow,” it said.
In the long run, Mr. Mukherjee said the present challenge would give India greater opportunities for growth. He also expressed confidence in India's ability to emerge stronger from the present situation.
