New Delhi: With the US financial turmoil sending shock waves to various parts of the world, Prime Minister Manmohan Singh on Friday asked cabinet ministers to stay alert on the unfolding situation.
Singh’s caution came during the meeting of the Cabinet Committee on Economic Affairs after Finance Minister P Chidambaram briefed about the financial crisis in the US while stating the Indian economy was not affected by the developments.
Finance Minister P Chidambaram briefed about the financial crisis in the US while stating the Indian economy was not affected by the developments.Taking the cue, stock markets showed a buoyancy in minutes with the BSE benchmark equity index surging by over 500 points by the mid-day.
“The Prime Minister asked the ministers to stay alert on the global financial situation,” Rural Development Minister Raghuvansh Prasad Singh told reporters after the CCEA meeting.
Chidambaram briefed the meeting and said that there is no impact of the US financial turmoil on the Indian economy, Singh said.
Stock markets zoomed up with frantic buying activity after these remarks, which boosted investors’ confidence.
Prime Minister’s Economic Advisory Council Chairman Suresh Tendulkar also said today that Indian economy is largely domestic demand-driven and would not be impacted much by the US financial crisis unless there is mess-up in the domestic markets.
Indian economy is largely domestic demand-driven, though not completely insulated from the US financial crisis, he said at a seminar.
Allaying fears, Chidambaram had on Thursdau said there was no cause for any alarm as Indian banks are largely insulated from the US financial crisis, which consumed that country’s fourth largest investment bank.
In his first reaction to the collapse of Lehman Brothers and bailout of insurer American Insurance Group (AIG) by the US Fed, he had said the government would continue to pursue reforms to retain near 8% economic growth momentum.
He had also said the Tatas, majority stakeholders in Tata-AIG joint venture, have assured the government that they would meet all the obligations to their policy-holders.
As far as PSU banks are concerned, Chidambaram said they didn’t have any undue exposure and whatever exposure they have are in accordance with RBI’s guidelines. Although ICICI Bank had some exposure, it has made disclosures for the same.
Putting a brave face, he said the Indian economy will grow close to 8%, “I still maintain my view that growth in 2008-09 will be close to 8%.”
Chidambaram saw no reasons to halt financial reforms. “Having regard to the context, having regard to international situation and having regard to our ability to keep regulations one step ahead of innovation.”
The Finance Minister’s remarks had also reversed the direction of activity in the stock exchanges with players starting frentic buying.
The Sensex which was down 700 points in the early trade on Thursday closed up over 50 points. It ended up over 700 points at over 14,000 points on Friday.