Finance minister P Chidambaram has ruled out restrictive
capital controls despite inflow of overseas money putting
pressure on inflation and said India would continue to
follow a gradualist approach to fuller rupee float.
acknowledged that rupee appreciation was a headache for
Indian exporters, but he said the rise was due to huge
capital inflows into the country and no immediate steps
were planned to curb the currency''s strength.
don''t believe in imposing capital controls on inflows.
We will keep an eye on the rupee but our policy is a well
regulated market determining the exchange rate,"
he said. "The rupee will find its level, if it hurts
any sector unduly, we will help that sector in other ways."
inflows of capital can create pressures that lead to inflation,
and/or appreciation of the exchange rate. We have responded
with an appropriate mix of policies in a calibrated fashion
without imposing any unduly restrictive capital controls,"
Chidambaram told India-Europe investment forum in London.
also assured European investors that there would be no
reversals of economic reforms.
out that the rupee is fully convertible on the current
account, Chidambaram said a number of transactions on
the capital account are also freely permitted. "There
is de facto full capital account convertibility for non-residents,
they can bring in their money and they can take out their
money," he said.
investors can bring in capital and take out their royalties,
profits, dividends and capital, including capital gains,
he said. Alongside gradual liberalisation of the capital
account, India has pursued fiscal consolidation with a
determination that has surprised many at home and abroad,
the finance minister said.
said the central bank policy tightening and currency strength
had helped to moderate inflation and more rate rises may
not be needed if the trend continues.
far central bank actions have moderated inflation. The
rupee rise has also helped moderate inflation to some
extent," Chidambaram told reporters on the sidelines
of the conference.
inflation is contained at current levels and shows a decline,
there is no reason why interest rates should go up."
week, data showed India ''s wholesale inflation fell to
its lowest level in 14 months at 4.28 per cent in the
12 months to 9 June. The signs of slowing price growth
came finally after five interest rate hikes in the past
year to 7.75 per cent.
Reserve Bank of India has also largely kept out of the
rupee''s way as the currency has surged to nine-year highs
versus the dollar, rising about 9 per cent so far this
economy, the third largest in Asia, grew 9.4 per cent
in the fiscal year ending March, its highest rate in 18
years and second only to China among major economies.
said the intention for this year was to keep inflation
at 4.0 to 4.5 per cent. He earlier told the conference
that inflation remained a concern for the economy but
policies aimed to tackle this issue should not dampen
have to strike a balance between growth and inflation.
The politically tolerant level of inflation in India is
4-4.5 per cent and we are aiming to keep it at that level,"
he said, noting that factors such as oil prices would