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FM allays fears over global financial turmoil

business Updated: Sep 19, 2008 02:09 IST
Gaurav Choudhury
Gaurav Choudhury
Hindustan Times
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Finance Minister P Chidambaram on Thursday allayed fears over the global financial turmoil, saying the Indian economy is resilient enough to stave off any spillover.

<b1>Global markets remained jittery for the fourth day amid reports that Morgan Stanley was preparing for a possible sell-off, and back home, a stock broker each in Hyderabad and Indore committed suicide, allegedly because of trade losses.

“Let me assure everyone (that) there is no cause for any alarm that any Indian bank is exposed or is vulnerable like couple of banks that have failed in the US,” Chidambaram said.

His comments helped the Sensex bounce back from a 705-point plunge in early trading and close 52 points higher.

The Sensex has lost more than 1,600 points, or 11 per cent, since September 8, when it became apparent that some of the top US financial firms could go bankrupt.

The week opened with Lehman Brothers’ bankruptcy and Merrill Lynch’s sale. Following them was American International Group, the world’s largest insurance company, which got a $85 billion bailout from the US government.

This stoked fears that more financial firms could report trouble and set off a chain reaction across markets worldwide.
Although India’s share market has been hit hard, analysts say the impact on the broader economy would be limited as it is relatively less open compared to many of its peers.

“Our banking system is reasonably insulated from what is happening in the rest of the world,” Chidambaram said, adding there could be some short-term squeeze on credit.