India needs no control on capital flows yet: Montek

By Arvind Padmanabhan, IANS
Wednesday, November 10, 2010

SEOUL - In a statement that should please investors both in Indian projects and capital markets, Planning Commission Deputy Chairman Montek Singh Ahluwalia Wednesday said there was no need yet for New Delhi to introduce controls on capital flows, including portfolio investment.

“I personally do not think there is any need to alter the present policy for foreign direct investment inflows because I think that’s not a very volatile thing, and if we get more of it within the realm of possibility then it’s excellent,” he said.

“I also do not think at the present moment there is any need to introduce any capital controls on portfolio flows,” Ahluwalia told journalists accompanying Prime Minister Manmohan Singh at the G20 Summit here.

The replies from Ahluwalia, a key Indian interlocutor at G20, came in the context of a move in the forum — hotly debated, opposed and welcomed by its members, based on their individual interests — on how to control inward investment flows.

“Yes, we have capital controls on debt and I don’t think we should relax those too readily. But yes, those are things you look at on a periodic, month by month basis,” he added.

In the remarks the key policy maker said if India was receiving around $55 billion worth of capital flows today, it will have no problem with another $20-25 billion.

Even if it surges to $150 billion, there would be ways to address the flows, he said, adding India had the appetite and capacity to absorb such large inflows, depending on which areas they were coming in.

Infrastructure was particularly welcome, he said.

Ahluwalia’s remarks come at a time when key Indian market indices, the 30-share Sensex of Bombay Stock Exchange, as also the S&P CNX Nifty of the National Stock Exchange (NSE) are ruling at all-time highs.

It also comes when it is being hotly debated if India’s current account deficit - the difference between total imports of goods, services and transfers and outflows on similar accounts - is sustainable at three percent of its economic output.

Filed under: Economy

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