The Hindu Business Line : ‘Fundamentals of Indian economy strong’

New Delhi, Jan. 21 The Government has said that the stock market fall of Monday reflected the “continuing uncertainties” in the global economy and not any change in the fundamentals of the Indian economy.

Reiterating that the fundamentals of the domestic economy are “quite strong”, the Finance Ministry said in a statement this evening that investors should take informed and responsible decisions in the situation and not be led by “market rumours or any “unwarranted apprehensions.

Most of the apex industry associations echoed the Government’s viewpoint, stating that weakening sentiments across major markets of the globe, not the fundamentals of the Indian economy, appear to have led to the steep fall in the Indian stock markets.

The Finance Ministry statement highlighted that most of Asia opened the year 2008 on a weak note with heavy selling pressure seen in most markets. Comparing the major Asian market indices as on January 2, 2008 with their closing today, it is seen that the Straits Times index has fallen by 14.75 per cent, Hang Seng by 13.58 per cent and the Nikkei is down by 9.29 per cent. The corresponding figure for BSE Sensex was 13.97 per cent, the statement added.

On Monday, the BSE Sensex had fallen by 1,408.35 points or 7.41 per cent and the NSE Nifty closed down 496.5 points or 8.7 per cent.

As regards the domestic economic conditions, the Finance Ministry statement pointed out that the Prime Minister’s Economic Advisory Council had in its just released review of the economy 2007-08 estimated the rate of growth of GDP in 2007-08 at 8.9 per cent, marginally lower than its previous estimate of 9 per cent in July 2007.

It was also highlighted that corporate profits as reflected in the third quarter 2007-08 results continue to be buoyant. Direct tax revenues have shown 42.8 per cent increase during April-December 2007. Moreover, banks have reported that investments in the pipeline are robust and credit demand was high.

The Federation of Indian Chambers of Commerce and Industry (FICCI) said in a statement that the steep fall in Sensex had nothing directly to do with the fundamentals of the Indian economy. The Indian economy and the performance of the corporate sector remains robust and in the long run, the capital market should certainly reflect the underlying strengths of the Indian economy.

Reacting to stock market crash, the Assocham President, Mr Venugopal N. Dhoot, said, “Erosion in stock markets valuations should be taken as short-term reaction to the global events and has limited effect on the real growth of the economy.” He maintained that the robust investments across various sectors such as power, steel, cement, transportation, real estates, telecom, and auto would keep the growth momentum in the Indian economy.

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