'Minimal shock to India by US meltdown'

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New Delhi, Oct 8: Planning Commission Deputy Chairman Montek Singh Ahluwalia on Wednesday, Oct 8 exuded confidence that the stock markets will bounce back as the fundamentals of the economy and the banking system are sound and averred that the impact of the global turmoil on the Indian economy would only be minimal.

Dr Ahluwalia told a Press Conference here that India's economic parameters were healthy and domestic driven. The impact of the global slowdown was largely on portfolio or Foreign Institutional Investor (FII) investments, which would be largely affecting the foreign exchange reserves and since India had abundance of these, the negative fall out can be absorbed.

The withdrawal of FII money, however, in the last few months has been felt by the bourses. ''I am not saying that India is insulated from global developments, but they would impact on it mostly indirectly,'' he said.

The Press Conference was convened to launch a refurbished and updated website of the Commission.

He said both the Reserve Bank of India (RBI) and Finance Minister P Chidambaram have categorically stated that the banking system was in sound health and that the depositors had nothing to worry.

Dr Ahluwalia said Indian banks are well capitalised. Besides, 35 per cent of bank deposits are parked either with the RBI or invested in secure government bonds. Thus, the depositor has nothing to worry.

He said the problem faced by foreign banks is because they have invested heavily in new kinds of assets, where the risks are high.

The Indian economy in an extremely unusual year, where there was high turbulence in the global markets and the world economy is faced with the prospects of a slowdown, would still be able to clock 7.5 to 8 per cent GDP growth, which by no stretch of imagination was bad. ''Even if we are able to have a slightly slower growth than this, it would certainly not be bad,'' he said.

Dr Ahluwalia said as all other economic and banking parameters were robust, there should be no doubt that the stock markets would bounce back.

He, however, said it would be difficult for him or anyone else to state as to when this would happen.

Dr Ahluwalia said the FDI flows into India remain positive, though their pace may have slowed down a bit. For increasing FDI flows it was important to carry out procedural simplifications, evolve a pragmatic land acquisition policy, infrastructure needs to be put in place, decisions need to taken fast and transportation and other utility movement should be made speedier.

On being asked as to what would be his advice to the retail investor who is extremely worried at the erosion of the value of his shares, Dr Ahluwalia said he was not the right person to be asked this question. Nevertheless, a wise course of action would be to diversify one's portfolio. ''It all depends upon what your appetite for risk is,'' he remarked.

Dr Ahluwalia said the somewhat serious impact of the global liquidity crunch is that the Indian economy too would be impacted by this and thus using prudent policies it was necessary to manage this.

He said sooner or later the global economy too would get resurrected as Central Banks in all countries were trying to grapple with the adversities. It would. however, be difficult to pinpoint as to when this would happen.

Talking about website, the Plan Panel Deputy Chief said it would be regularly updated and has all the important documents placed on the site on a regular basis.

Dr Ahluwalia said other government websites, which leave much to be desired, also need to be brought up to date and made user friendly. They need to be made interesting and be able to provide all relevant information.


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