Finance Minister P Chidambaram on Saturday expressed confidence that India can weather the storm of financial crisis blowing across the world saying the country's economic fundamentals and the banking system were strong.
He admitted there is a liquidity crunch in the market and that the economy was facing 'spill over and ripple' effects of the global storm but held out an assurance that the "RBI is ready to take further steps and infuse more liquidity if necessary".
Referring to the current global meltdown, Chidambaram said "there is a storm blowing in the world. We did not not create the storm. We are facing the spillover effects or the ripple effects of the storm.
"We must brace ourself and weather the storm. I am confident that the Indian economy is strong and resilient to weather the storm and I would request all players in the economy to cooperate with the government in weathering the storm," he told PTI.
Chidambaram said "the weekend is a good time for people to reflect. Firstly, those who have money... There have been wage increases for the government servants, and many have received Diwali bonuses.
"Those who have money should spend some money and should save some money. Savings in banks are completely safe. Our banks are well regulated and well capitalised. Depending on your risk threshold you can save in some other instruments. Someone with a low risk threshold should save in a bank," he said.
The Finance Minister said for those who need money for running their businesses, trade and firms, the government recognised that there is a liquidity crunch.
"But we have responded swiftly and we have infused a huge amount of liquidity. Between now and October 25 or so, a huge amount of liquidity will find its way into the Market through CRR cut, fertiliser subsidy, additional spending on National Rural Employment Guarantee schemes and payment to banks for loan waiver," he said.
Besides, the RBI is ready to take further steps to infuse more liquidity, if necessary, he added.
On deposits in banks, Chidambaram said "no depositor need have any reason to worry. Different investors have different risk profiles. But if you are an investor you should take informed decisions. The last thing you should do is to act in haste. The last thing you should do is to give room for panic."
He maintained that the fundamentals of the real economy were strong. "If you ask me whether the fundamentals of the economy have changed so dramatically as portrayed in the stock market, the answer is no."
In fact, Chidambaram said that some promoters were buying shares this time. Therefore, no investor need to take any decision in haste or in panic. "He or she should take informed decisions."
Chidambaram said "The weekend is a good time to calmly reflect on the situation. Any citizen of India should reflect calmly while coming to the conclusion that we can weather the storm."
The minister said inflation was inching down and huge capacities were being added. "Our regulators are vigilant and any citizen of India should reflect calmly on the way we should weather the storm."
To a query, he said the export and import growth was 35.1 and 37.5 per cent respectively in dollar terms.
He doubted the industrial production figures, which showed a plummeting of industrial growth to 1.3 per cent, and said he has conveyed his concerns to the Ministry of Industry.
"There are certain concerns about the IIP figures and I have conveyed these concerns in the past and today to the Ministry of Industry," he said reacting to the data on Index of Industrial Production figures released yesterday.
Chidambaram said "growth in capital goods in July was 20 per cent. This has fallen to 2.3 per cent in August. There cannot be such a dramatic shift in capital goods production. It can't take place."
"Therefore I have asked them to do a double check on these numbers. In July the figures were revised from 7.1 per cent to 7.4 per cent," he said adding that if these are the numbers then the performance of August is not very satisfactory.