National

Government monitoring crisis 24x7, says Chidambaram

NEW DELHI: Finance Minister P. Chidambaram on Tuesday assured captains of industry that the government, along with the Reserve Bank of India (RBI), was monitoring the situation “24x7” and would take appropriate steps, whenever required, to tackle the “spill-over effects” of the global financial meltdown.

Addressing delegates at the India Economic Summit organised here by the World Economic Forum (WEF) and the CII, Mr. Chidambaram said that while the developed world, including the U.S., the Euro zone and Japan, had slumped into recession, the Indian economy was being affected by the spill-over effects of the global liquidity crisis.

Mr. Chidambaram noted that it was not the first time that industrialised countries were going through a recession. “This recession, of course, threatens to be a longer and deeper recession affecting more industrialised countries and we in India are experiencing the spill-over effects of what is happening in the advanced countries. We are not the cause of the problem, but we are being invited to be a part of the solution to the problem,” he said.

Taking up various sectors of the economy, Mr. Chidambaram admitted that the Indian rupee was under pressure, “but once the flow [capital] is reversed, as we believe it will, it is quite possible that the rupee will climb upwards.”

“There was a huge demand for dollars mainly coming from oil companies and others who have to meet the payment obligations. But it is quite possible that in a month or two that the direction of flows can reverse and the rupee will settle at an appropriate level. The rupee has depreciated because the dollar has shown extraordinarily strong performance. It is ironical that money is flowing back to the country where the crisis originated,” he said.

Pointing to farming, the Minister said: “The monsoon has been good. Farmers are busy with their work, they don’t look at the Sensex, or the Nifty everyday. We will have a very substantial bumper crop.”

As for the services sector, mainly driven by millions of small and medium enterprises, Mr. Chidambaram conceded that there were certain problems.

“They are facing some liquidity problem. We are determined to ensure that they are provided adequate liquidity so that they can carry on their work, their business, until we tide over the crisis.”

The larger problem was in the financial sector and large industries. “We are extremely vigilant. We have been proactive. In fact, in the last 60 days both the government and the RBI have moved swiftly to take steps that will ensure adequate liquidity for industry,” he said.

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