New Delhi, Oct 30: Saying that India is faced with the problem of enormous capital flows, Finance Minister P Chidambaram today called for putting in place risk and regulatory systems to moderate these flows.
''We have a problem of enormous capital flows. This is a completely new situation for us. We welcome capital. We must learn how to manage and absorb capital,'' Mr Chidambaram said addressing the three day conference here of the 'Fortune Forum.' ''We must ensure that regulation does not fall behind innovation,'' he said.
''Regulation and derisking the system must always be one step before innovation. We value capital but we must avoid shocks.
Therefore, we must have regulations,'' Mr Chidambaram said.
The Finance Minister, however, said the country needs a ''huge amount'' of capital inflows to enable the economy to grow faster.
''We need to put in place appropriate regulations. We need to put in place appropriate risk management systems," he remarked.
Mr Chidambaram said the country's investment to GDP ratio would rise to 40 per cent in the next four to five years.
''Thanks to savings of advanced countries as well as efforts domestically our savings rate is in the region of 35 per cent. We expect the investment to GDP ratio to go to 40 per cent in the next four to five years,'' Mr Chidambaram said.
Mr Chidambaram lashed out at the rise in protectionist trade barriers in some advanced countries adding that this was a matter of concern for India which was opening up its economy.
Prime Minister Manmohan Singh had echoed a similar sentiment while inaugrating the event yesterday.
Speaking about lowering of trade barriers, the Finance Minister said the government will offer protection to the agricultural sector.