New Delhi: Capital inflows have not become a problem for the Indian economy as of now and the country does not face a situation that requires imposition of capital controls, Prime Minister Manmohan Singh said on Tuesday.
“Well the Tobin tax has merit in particular situations but as far as India is concerned we have not reached a stage where capital flows have become a problem,” Singh said.
“If capital inflows into our country both by way of direct investment and by way of portfolio investment have been at reasonable levels, we don’t face situations of the kind which would require an imposition of Tobin Tax.”
Foreign fund flows into and out of stocks play a crucial role in determining the rupee’s fortunes. So far in June, foreigners have bought a net $1.9 billion worth of shares, almost reversing the $2 billion outflows seen in May.
Foreigners are net buyers of $6.5 billion so far in 2010.
Singh also said the world economy needs a “calibrated attempt” at fiscal consolidation rather than a one size fits all sort of action.
He also said India’s fiscal situation is a cause for concern. “...Our fiscal situation is a cause for concern but when we compare the fiscal deficit or the GDP debt ratio of the major developed countries, I think we come out much better,” Singh told reporters on his way back from the G-20 summit in Canada.
Earlier on Sunday at the summit, Singh had warned of the risk of global double-dip recession if countries simultaneously cut government spending, recommending a nuanced approach for dealing with public debt.