Govt not to curb capital flows, liberalisation of capital account

New Delhi, Nov 12 (UNI) Finance Minister P Chidambaram today emphatically stated that the government was not planning further steps to curb the capital flows into the country, saying that the recent measures taken by SEBI would help moderate short term and medium term flows.

Inaugurating the annual 'Economic Editors Conference' here, Mr Chidambaram said the surge in the capital inflows was a test of the absorptive capacity of the economy.

He said the absorptive capacity of the economy would be demonstrated in terms of the projects that are taken for completion.

SEBI had taken measures to ban Participatory Notes to make capital flows more transparent. The Finance Ministry too had put restrictions on External Commercial Borrowings to curb speculative flows.

Mr Chidambaram said the government would continuously liberalise the capital account with a view to moving towards "fuller convertibility of the Rupee." ''Over time the connotation of full convertibility has changed to fuller convertibility. We will gradually move towards fuller convertibility of the Indian currency,'' Mr Chidambaram said.

Mr Chidambaram said the government was mulling ways of the State Bank of India raising monies in the capital market. He said a decision in this regard will be taken soon. .

The Finance Minister said a grey area in the India growth story was the hardening of food, commodities and oil prices, which has dire implications. He, however, did not elaborate on the consequences of rise in prices of these items.

Mr Chidambaram said the appreciation of the rupee had both advartages and disadvantages. On the downside it was retarding the growth of exports, while it also reflected the competitiveness of the Indian industry and made imports cheaper.

The Finance Minister said it would be prudent not to look at a particular month and draw an inference that industrial production was declinining. He exuded confidence that both the industrial and services sector would record a nine to ten per cent growth this fiscal. Industry and services together account for 83 per cent of the country's GDP.

Mr Chidambaram said the fiscal deficit target for the fiscal would be met and he will adhere to the targets outlined in the FRBM Act.

Answering a question on the quantum of back money, Mr Chidambaram said his asessment was that it was on the decline as the tax revenues were growing at a robust rate of 40 per cent and the fact more people were now filling more returns.

The Finance Minister's address and the Question- Answer session that followed lasted over two hours. A large number of journalists from all over the coutry are attending the three-day event, organised by the Press Information Bureau.

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