No question of capital controls: FM

Maintaining that there is no turbulence in the domestic financial markets, finance minister P Chidambaram...

Maintaining that there is no turbulence in the domestic financial markets, finance minister P Chidambaram has said that the Government has no intention of imposing any kind of capital controls or keeping out any kind of funds. “There is no turbulence. It was an instant reaction by fund managers that some kind of restrictions are being placed on investments by Foreign Institutional Investors,” Chidambaram said. “All we say is that instead of coming through a non-transparent route of participatory notes issued on the basis of overseas derivative instruments, please come in as FIIs and register in India.”

On Monday, capital market regulator Sebi cleared 16 FII applications for registration and announced that it would allow proprietary sub-accounts to register themselves. “It increases transparency. It also subjects investors to due diligence by Indian authorities. I think the clarifications have gone home now,” he said, going on to reject the call of the Left parties to ban Participatory Notes (PNs).

“I don’t think the Left parties have understood the complexity of the issues. It is a very simplistic call — ban PNs,” said Chidambaram, who is in Washington to attend the Annual Meetings of the IMF and World Bank.

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The finance minister reiterated that the government would like the exchange rate to be competitive but went on to make the point that there is “no choice” but to continue with sops to exports in the face of an appreciating rupee. “We don’t take a view on the exchange rate. However, we would like that exchange rate to be competitive without hurting investments. The one way bet on rupee was causing some concern, but in the last two or three days that has changed. The rupee is moving both ways,” he said.

Rich nations must act

Washington: The finance minister asked the rich countries to take fast steps to cool down volatile financial markets, while fearing uncertainty in 2008 with turbulence spreading from the US epicentre to Europe. “We urge the advanced economies to take measures to restore full normalcy in financial markets,” he said.

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