International Monetary Fund Managing Director Dominique Strauss-Kahn on Thursday hailed India's approach to foreign capital inflows as ‘the right one' as the strategy would help in attracting $1 trillion into the infrastructure sector as investment.

Addressing an interactive session, organised by the Federation of India Chambers of Commerce and Industry, Dr. Strauss-Kahn said: “So in my view, the Indian approach [on capital inflows] is the right one...the capital inflows may prove even more useful [for infrastructure development].”

The IMF pointed out that capital flows worked out as beneficial for economies when they were channelled towards growth prospects and as far as India was concerned, such inflows could be put to good use without sacrificing economic stability.

“So the general view that we should have on this capital flows, of course, is that as India is now looking for something like $1 trillion for infrastructure, so the capital inflows may prove even more useful,” he said.

On the issue of capital controls being put in place by other emerging economies to tackle the excess capital flows, Dr. Strauss-Kahn said: “India has neither undertaken massive interventions, nor decided to strengthen its capital control, even if it is understandable that some other countries have to do just to avoid the consequences of too big disruptive capital inflows.''

Pointing out that the global economic recovery still remained fragile and uneven and the EU crisis still remained strong, the IMF chief said: “It is overoptimistic to believe that the crisis is behind…We need a strong medium-term consolidation plan in most advanced economies.”

While hailing India's approach on fiscal management, Dr. Strauss-Kahn said, “One of the lessons of this crisis is clear, that is, the value of fiscal space. That is very important for India ”.


A case for capital controlsApril 15, 2011

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