The Union Finance Minister, P. Chidambaram, on Saturday met bankers and foreign institutional investors (FIIs) to discuss current economic issues, including fiscal as well as current account deficits and ways and means to bridge the widening current account deficit (CAD) in the background of falling value of rupee against the dollar.
“The government was looking for accelerating inflow of foreign funds to the country and the Finance Minister was assessing the impact of increase in rates of foreign currency non-resident deposits,” said Pratip Chaudhuri, Chairman, State Bank of India (SBI) while talking to The Hindu.
The Finance Minister was taking the views of bankers and market participants, for short-term measures, which could bring in more foreign funds to the country, which could stem volatility in the foreign exchange market at the earliest.
The rupee tumbled by around 20 per cent in this financial year, touched its historic low last Thursday at 65.56 a dollar intra-day. It is the worst performing currency among emerging market economies.
Mr. Chidambaram was accompanied by Economic Affairs Secretary Arvind Mayaram and Financial Services Secretary Rajiv Takru.
To get feedback from market participants and to instil confidence among them, the Finance Minister also met select FIIs.
“We have done our arithmetic to get some additional flows, including through quasi sovereign bonds issued by public sector finance institutions…..They are preparing for a programme and according to that it will be decided,” said Mr. Mayaram. However, Mr. Chidambaram did not speak to the media.
Mr. Takru said that lot of good ideas came out of the meeting. “I think you should see something coming up shortly, next 8 to 10 days.” He also said that in the last one month, 27 different projects had been cleared with timeframe. “These are all large projects and next week, nine projects are coming for final decision before the Cabinet.”
Mr. Mayaram also said that the country was expecting strong capital inflows through the foreign direct investment (FDI) route to compensate any outflow of funds as the U.S. Federal Reserve rolls back its stimulus programme, which is likely to attract funds back to the U.S.
Other than Mr. Chaudhuri, bankers who attended the meeting were S. S. Mundra, Chairman and Managing Director of Bank of Baroda, V. R. Iyer, Chairperson and Managing Director of Bank of India, Aditya Puri, Managing Director, HDFC Bank, Chanda Kochhar, MD and CEO, ICICI Bank, Anurag Adlakha of Standard Chartered Bank and Pramit Jhaveri, CEO, Citibank India.
Ms. Kochhar said that the meeting was mainly to seek suggestions and ideas about what could be done on capital inflows. “I think it was a good and positive meeting,” she added.
“The discussion was purely on the inflow of deposits and how we can attract more inflows,” said Ms. Iyer.
On meeting FIIs, Mr. Mayaram said that this was to understand their concerns as well as to get their feedback on the current economic scenario. “Broadly,” he said, “we are seeing that in the first quarter, exports have picked up and FDI flows have been very strong as compared to the first quarter of last financial year.” So the government believes that in the real economy, investments will begin to pick up soon.