Protectionist trends in financial mart of advanced countries: RBI

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Mumbai, Apr 29 (UNI) Reserve Bank of India Governor Y Venugopala Reddy did not visualise any reversal trend in the outgo of foreign exchange due to strong economic fundamentals of the country.

In his post Policy announcement press conference here, he however cautioned about the increasing protectionist trends around the world in anticipation of growing possibilities of slower growth in advanced economies. Even financial markets in such countries appear to move in for such protectionist tendencies he said, adding that in several key commodity producing economies, policy measures were in place to restrict the availability of supplies in international markets.

Dr Reddy could not find any logic in the policies of countries which wanted a regulated financial market within the country but an unregulated global financial situation.

He said, in the policy that linkages between financial sector developments and the real sector had become more worrisome than before, which apprehensions that financial turmoil might spill over to the real sector with adverse implications for employment and growth.

''With financial institutions tightening in lending standards, deterioration in asset quality and deceleration in consumer loan demand, there are signals that events in financial markets are beginning to have a persisting impact on other dimensions of the real economy as well,'' Dr Reddy said.

Emerging market economies were exhibiting resilience so far in the face of global financial turmoil reflecting relatively stronger macro economic framework and sustainable macro economic balances. But how long and to what extent it would persist was uncertain, he added.

UNI VK GR AG1751

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