New Delhi: The finance ministry today indicated it will not intervene in the foreign exchange market even if capital inflows into the country touch $50 billion during the 2010-11 fiscal, reports PTI.
“$50 billion ...you could have around that. Inflows will continue according to me,” Thomas Matthew, joint secretary in ministry of finance, told reporters on the sidelines of a conference on corporate governance.
Matthew said in reply to a query on whether the capital inflows could exceed $50 billion in the current fiscal as in the previous financial year. Foreign Inflows during the April-September period stood at $37.4 billion.
On the possibility of government or the Reserve Bank of India (RBI) intervening in the market to check surge in capital flows, Matthew said, “The finance minister (Pranab Mukherjee) has already said there is no need to interfere in the market.”
The surge in capital flows, according to the Mid-Year Analysis prepared by the finance ministry, is fuelling stock markets and putting pressure on rupee.
“The main implication of such large capital flows to India has been buoyancy in stock markets and appreciation of rupee vis-à-vis dollar,” it had said.
The capital flows have remained volatile in the past couple of years. It went up to $108 billion in 2007-08 before nose-diving to a mere $8 billion in 2008-09, mainly on account of the global financial meltdown.
The inflows, however, picked up during 2009-10 rising to $53.6 billion.
New Delhi: The government today pegged the economic growth rate at a ‘conservative’ 8.75% for this fiscal, and cautioned against contagion effects of the financial crisis in Europe which accounts for 36% of India's exports, reports PTI.
Improvement in exports is essential to bring down current account deficit, which is pegged at 3% of the gross domestic product (GDP) or up to $56 billion and is not sustainable for long term, finance minister Pranab Mukherjee said at the annual general meeting of Associated Chambers of Commerce and Industry (Assocham).
Current account deficit (CAD) represents movement of money out of a country on net basis, barring capital flows.
CAD surged three-fold to $13.7 billion in the first quarter of this fiscal over the same period last year due to higher imports because of economic recovery and larger payments overseas for certain services.
“Current account deficit would be around 3% of GDP and in absolute terms, perhaps around $55-$56 billion (this fiscal) and cannot be maintained for a very long period of time,” Mr Mukherjee said.
“Therefore, recovery of exports is absolutely necessary and those are linked with global developments,” he added.
Mr Mukherjee said 36% of India’s exports go to Europe and if the sovereign debt crisis in Europe turns contagious and spreads, the country will not be able to immediately find new markets.
“Unless there is robust recovery in Europe, immediately we cannot shift our market and improve international trade scenario,” Mr Mukherjee said.
After engulfing Greece, Portugal and Spain, the financial mess has unfolded in Ireland.
Mr Mukherjee also highlighted the need to work together with other countries to build pressure against protectionist measures.
“We cannot live in cocoon, we cannot live simply by raising protectionist measures,” he said.
The finance minister was, however, confident that the economy would grow by 8.75% this fiscal, a conservative estimate given a healthy 8.9% growth in the first half.
“I am a bit conservative so I would be happy if it is 8.75%,” he said.
This estimate is not only lower than what was witnessed in the first half, but also the upper-end of over 9% forecast in the Mid Year Analysis, tabled by the finance minister himself.
Mr Mukherjee said because of the stimulus, fiscal deficit widened to over 6.4% last fiscal, but exuded confidence that it would be pruned to 5.5% this fiscal, as is projected in the budget.
New Delhi: The telecom industry has come out in support of new communication and IT minister Kapil Sibal for his observation that the sector should not be viewed as source of revenue for the finance ministry, reports PTI.
“This sector is heavily taxed. We pay nearly 26% of our revenues to the government in form of one tax or the other. The ministry is taking a different perception about the industry after few years. We are looking forward to work with him,” Peter Martin, MD and CEO, Vodafone-Essar, said.
Vodafone alone would be paying Rs18,000 crore to the government this fiscal which includes levies as well as fees for third generation (3G) spectrum, he said.
Commenting on the present day debate on whether spectrum should be auctioned or not, Mr Sibal had yesterday said, “We must ensure that the industry had enough money to invest in the sector.
If price of spectrum is high then you (service providers) will not be able to provide low tariffs.”
Mr Martin also raised the issue of level playing field.
There are some anomalies over spectrum usage fee charged from an ordinary operator vis-à-vis dual-technology players.
A dual-technology player with 4 MHz of spectrum each in CDMA and GSM technologies ends up paying lesser charges to the government compared to a GSM operators holding 8 MHz of spectrum.
“This needs to be corrected to create a level playing field and the minister has assured to look into it,” Mr Martin said adding that the government must come out with policy for distribution of spectrum in a transparent manner.
The GSM lobby—Cellular Operators Association of India (COAI)—also said they were looking forward to working closely with the government for the growth of the sector.