The Hindu Business Line : We must learn to manage large capital flows: Chidambaram

New Delhi June 15 The Union Finance Minister, Mr P. Chidambaram, said on Friday that the country must learn to manage large capital account flows. "We aspire to be a developed economy... We must learn to manage a fully convertible or nearly fully convertible capital account... the only way to manage large inflows is to evolve a set of policies that will encourage large outflows too. If inflows and outflows are equally large, then it is manageable," he told news channel CNBC TV18 in an interview.

While stating that India needed to encourage policies to promote capital account outflows too, Mr Chidambaram dismissed the idea of putting any quantitative restrictions on FDI to restrict foreign currency inflows. He said the Government would set up the proposed SPV that will borrow from the RBI to co-finance external commercial borrowings (ECBs) for capital expenditure outside India over the next two-three months.

Relief Package

Mr Chidambaram said a relief package is in the works for leather and textile exporters, who have been hit by the rupee appreciation. "Textile and leather sectors have met me... We will find means and ways in which we can extend them a helping hand," he said in the interview.

Mr Chidambaram said he hoped to convince the Government's allies on the need for higher FDI in sectors such as insurance. Whether he was in favour of a cut in personal taxes, the FM said: "There is scope for further reduction if compliance improves."

Separately, in an interview to news channel NDTV Profit, Mr Chidambaram said that while the issue of disinvestments was on hold for now, "... the only leeway we have is if a PSU goes in for an IPO, we can piggyback on that to raise funds."