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New Delhi, March 10 The Finance Minister, Mr P. Chidambaram, has said that the Government may take “temporary measures” if needed to “modulate” capital inflows into the country.

“The Government will, in consultation with the Reserve Bank of India, continue to monitor the situation closely and take such temporary measures as may be necessary to modulate the capital flows consistent with the objective of monetary and financial stability,” Mr Chidambaram said in a written reply to a Parliament question on Friday. The written replies were released to media on Monday.

On whether the widening of interest rate differential between India and the US would propel capital flows into the country, Mr Chidambaram said that the strength of the fundamentals of the economy would be a “crucial factor” even as he noted that interest rate differential was one of the factors that could influence capital flows.

“To the extent that interest rate differentials influence flow of capital across borders, there is possibility of increase in capital flows into the country,” he said.

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