Capital flows no problem yet for India: PM

ON BOARD AIR INDIA ONE - Capital flows into India are not a problem as yet and are not causing inflation in a manner that can be seen as a matter of concern, Prime Minister Manmohan Singh said Friday.

“Capital flows can create problems but we are not in that stage where capital flows can become a major problem,” the prime minister told journalists on way back from Seoul after attending the G20 Summit.

“We will manage our affairs in such a manner that capital flows do not give rise to inflationary problems,” the prime minister added.

The remarks come at a time when it is being hotly debated if India’s current account deficit — difference between imports of goods, services and transfers and outflows on similar accounts — is sustainable at 3 percent of its economic output.

Planning Commission Deputy Chairman Montek Singh Ahluwalia had Wednesday said in Seoul 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 had said on the margins of the G20 Summit.

The replies from Ahluwalia, a key Indian interlocutor at G20, had came in the context of a global move that is being hotly debated, opposed and welcomed by countries, based on their individual interests, on how to control inward investment flows.

“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,” the deputy chairman of the plan panel added.

(Arvind Padmanabhan can be reached at arvind.p@ians.in)