New Delhi, Oct 21
THE Finance Minister, Mr P. Chidambaram, today allayed fears of possible large-scale pullout of portfolio investments by foreign institutional investors (FIIs) and expressed confidence that the country would continue to get large inflows.
"If there are inflows (from FIIs), there will be periods where there are outflows. We must be able to take both inflows and outflows in stride. I am confident that we would continue to get large FII inflows," Mr Chidambaram said in his address at the Assocham Annual Session here today.
The Finance Minister said that he has been assured through many quarters that FIIs are here to stay for the long term. Mr Chidambaram said that FII investment so far in the current fiscal stood at $4.3 billion. For the calendar year 2005, the Minister said that the FII investments level is already $8.2 billion.
`Rupee still strong': On the issue of rupee movement, Mr Chidambaram maintained that the currency is still strong despite nominal depreciation. He highlighted that as of October 18, the rupee appreciated against the euro by 4.40 per cent, against the pound by 3.8 per cent and against yen by 4.3 per cent.
"It is only against the US dollar that the rupee has depreciated by 3.1 per cent. In terms of real effective exchange rate, the rupee is still a reasonably strong currency," Mr Chidambaram said.
On foreign direct investment (FDI), the Finance Minister said that the FDI inflows during April-August 2005 stood at $1.909 billion. This, he said, represented a 20 per cent jump over the level recorded in the same period last year and the highest since 2000-01.
For the January-August 2005, Mr Chidambaram said that FDI inflows stood at $2.573 billion, a 14 per cent growth over last year and the highest since 2000-01. "The flip side of course is this is a fraction of what China attracts and poised to attract in future too," he said.
`Trade deficit not alarming': As regards trade deficit, Mr Chidambaram said that the trade deficit seems to be large, but certainly a healthy sign for a growing economy and therefore not a cause for worry.
Trade deficit in the first half of the current fiscal touched a level of $20.32 billion as against $11.88 billion in the same period last year.