The Hindu Business Line : American investors confident about reforms: Chidambaram

THE Union Finance Minister, Mr P. Chidambaram, has said that he does not get the impression that American investors lack confidence in the Indian economy and that while there may have been some concerns during the election cycle, confidence has been "more or less completely restored."

Mr Chidambaram was addressing media persons at the Embassy of India here, wrapping up his visit to Washington and was asked to comment on American investor confidence against the backdrop of the present political arrangements in the country.

"I don't get that impression," Mr Chidambaram replied. "When you look at foreign institutional investor (FII) fund flows, May and June were negative, but July was positive, August was more positive and September has been even more positive. The largest number of FII registrations has taken place after the new Government has taken office — now the number is over 600. The largest number of sub-accounts have been opened up, since the new Government took office," the Minister remarked.

"Foreign direct investment (FDI) flows have been quite impressive. In fact, in calendar 2004, FDI flows are among the highest in the last seven or eight years," he added.

"I don't get the impression that investor confidence is low. Yes, in the early stages there was some concern that arose from the rhetoric — pre-election and post-election. As the Government settled down, as the Government is addressing issues, I think investor confidence is more or less completely restored," said Mr Chidambaram.

The Minister was also asked about any conflict there might be between the Government and the National Advisory Council. He rejected this contention, going on to make the argument that the national common minimum programme contains a number of things, some of which that could be done immediately by the Government and some which are ideas and concepts that needed to be debated and fleshed out and then presented to the Government.

"There is no conflict, apparent or real," the Minister remarked, and went onto make the point that the National Advisory Council is looking at the medium- and the long-term programmes, whereas the Government is focussing on what can be done in the immediate basis.

On the issue of inflation and interest rates, Mr Chidambaram maintained that the present inflation is caused by supply side shocks. "It is not a demand-led inflation. It's the oil prices and the commodity prices, which have contributed to the inflation; and while in the short-term, there are no indications of prices moderating, it is likely that oil prices will moderate, for these prices are completely unsustainable in the long run," the Minister said.

"Interest rate adjustments must be cautious enough in a measured manner. While price stability is indeed a desirable goal, developing countries' growth is also a desirable growth...Growth and price stability are not irreconcilable goals," Mr Chidambaram maintained.

In his opening remarks, Mr Chidambaram stressed that he took every opportunity to convey the broad policy stance of the new Government, making the point that while everything that needs to be done will be done, the bottom line would be that the reforms in India would have to show immediate and tangible benefits to rural areas, especially those in the agricultural sector.

The Finance Minister, in the course of his interaction, made the point that the political Left in India is not opposed to receiving World Bank funds or funding for projects; rather that the Communist parties were only opposed to the inclusion of representatives in the planning process.