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No plans to impose capital controls: FM

Chidambaram says, "there is no turbulence. It was an instant reaction by fund managers that some kind of restrictions are being placed on investments by FIIs".

world Updated: Oct 23, 2007 12:07 IST

Maintaining that there is no turbulence in the Indian financial markets, the Finance Minister P Chidambaram has said that the government of India has no intention to impose any kind of capital controls or keep out any kind of funds.

"There is no turbulence. It was an instant reaction by fund managers that some kind of restrictions are being placed on investments by Foreign Institutional Investors," Chidambaram told PTI in an exclusive conversation.

He said the government has clearly mentioned that it has no intentions to impose capital controls, or to keep out any kind of funds.

"All we say is that instead of coming through a non transparent route of participatory notes issued on the basis of overseas derivative instruments, please come in as FIIs and register in India," he added.

On Monday, capital market regulator Sebi had said it has cleared 16 FII applications for registration and announced that it would allow proprietary sub-accounts to register themselves.

"It increases transparency. It also subjects these investors to due diligence by Indian authorities. I think the clarifications have gone home now," the Finance Minister said going on to reject the call of the Left parties in India to ban Participatory Notes (PNs).

"I don't think the Left parties have quite understood the complexity of the issues. It is a very simplistic call -- ban participatory notes," said Chidambaram who is in Washington to attend the Annual Meetings of the International Monetary Fund and The World Bank.

The finance minister further reiterated that the Indian government would like the exchange rate to be competitive but went on to make the point that there is 'no choice' but to continue with the sops to exports in the face of an appreciating rupee.

"We don't take a view on the exchange rate. However we would like then exchange rate to be competitive without hurting investments. The one way bet on rupee was causing some concern, but in the last two or three days that has changed. Rupee is moving both ways. On Monday rupee closed at 39.89," Chidambaram said.

"What choice do we have" the Finance Minister said when asked on the continuance of sops to exporters. "If rupee continues to appreciate rapidly we have to extend some support to the exporters. There are other sections of the economy that will gain by the appreciating rupee, but exports will be hit and exports are important for us... Therefore, we have given them support and if necessary we will give them support" Chidambaram said.

Asked if the the recent decision to put on 'hold' the US India Civilian Nuclear deal will impact the financial markets, he said the decision would not have a direct impact on the financial markets of the country although there is bound to be some disappointment.

But, "the Indian market is a growing market, a market that is well regulated, a market that gives good returns. Investors will come into the Indian market. I have no sense at all that investors will be deflected because of the difficulties the Indo-US civilian nuclear deal faces.