The Hindu Business Line : Banish fear: Chidambaram

The Finance Minister, Mr P. Chidambaram's promise of more measures to infuse liquidity coupled with his advice that there was no reason at all for investors to act in haste or to give room for panic helped lift the benchmark Sensex by 781 points on Monday, the first trading day after the biggest drop in 18 years last week.

"We must remain confident and respond to the situation in a cool and mature manner. We must banish fear. Especially, depositors have nothing to fear because their deposits in banks are safe. Investors must take informed decisions," Mr Chidambaram told a press conference minutes before the Indian stock markets opened for trading today.

His comforting words about the health of the Indian economy and assurance that the Government, RBI and SEBI were coordinating their actions triggered a relief rally in the stock markets. The markets also took comfort from the infusion of Rs 60,000 crore into the banking system through a 150-basispoint cut in cash reserve ratio (CRR).

"We are working on more measures that will infuse liquidity, make credit intermediation smoother, and increase the confidence of depositors and investors. We hope to be able to announce them shortly," he said.

The Finance Minister said that there was no dramatic change in the fundamentals of the economy. The Indian economy continues to grow at a satisfactory rate, he said. To a question on whether the current spotlight on liquidity problems was diluting the Government's attention on inflation management, the Finance Minister said "of course inflation is a concern".

He highlighted that crude oil prices and commodity prices, especially metals, had declined sharply and this had given some comfort. "It is expected that these price declines will have beneficial effect on inflation," Mr Chidambaram said.

Text of Chidambaram's statement

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