FM: India unaffected by US sub-prime loan crisis

Unfazed by the sharp fall in the stock market on Monday, the finance minister P Chidambaram attributed the oscillating nature of the markets...

Unfazed by the sharp fall in the stock market on Monday, the finance minister P Chidambaram attributed the oscillating nature of the markets to the movement in the Asian bourses. When asked if today’s fall of 235 points and previous falls are a matter of concern, the finance minister said: “So what? Markets will rise and markets will fall”.

“When this government took over, the benchmark index was near 4,400 and today it is on either side of 15,000,” Chidambaram added against the backdrop of the over 430 points fall in the benchmark Sensex in morning trade. His comments assume importance in the wake of the market plunging from its peak of 15,868 by about a 1,100 points in a fortnight.

Commenting on the three major falls the market suffered in the recent past, including today’s, he said: “That’s because the Asian markets are down. We are part of the globalised economy today. If there is a downturn in one market, it will affect other markets.”

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The Sensex had plunged by 542 points on July 24, followed by another 615 points fall on August 1, on reports of the credit crunch in the US market — a crisis triggered by weaknesses in the sub-prime lending market there. The minister, however, denied any influence of US sub-prime credit market on Indian stocks, adding that there was virtually no impact in India, as there was no lending at sub-prime rates here.

“Sub-prime rates in India are given to the highest rated industrial group… You and I don’t get sub-prime rates. Somebody like NTPC may get a sub-prime rate or Tatas… I am only speculating,” he said.

“Whereas in the US, the bulk of the market is lending at sub-prime rates…. our bankers are pretty shrewd, I don’t think they extend sub-prime rates to many,” Chidambaram said commenting on the practice of extending credit below prime rates.

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