Indian economy to sustain current storm: FM

Terming the present scenario being marked with uncertainty, there are some facts that cannot be and ought not to be ignored, said the Union Finance Minister, P. Chidambaram. The Indian economy continues to grow at a satisfactory rate, and as per projections made by the IMF, India is expected to post a GDP growth of 7.9% during the current fiscal year, despite the impact of the global liquidity crunch, Chidambaram added citing the recent observations of IMF's Economic Counselor and Director (Research Department) Oliver Blanchard.
The FM said that though the stock market indices are important indicators, they are not the only indicators of the health of the Indian economy. The ratio of investment to GDP remains high at over 35% at the end of the first quarter of 2008-09. The monsoon has been normal; the Kharif crop (especially rice and cotton) has been good; farmers are sowing their fields; and the prospects for the Rabi crop are bright. Factories continue to produce goods and the services sector is growing at a brisk rate.
At the same time crude oil and commodity prices have declined sharply, which is likely to have a beneficial effect on inflation.
The root cause of the present uncertainty is liquidity and not any dramatic change in the fundamentals of the economy. Nevertheless, liquidity was found to be inadequate and, consequently, lenders were unwilling to take risks. These problems can be overcome if adequate liquidity is infused into the system.
Time and demand deposits with banks grew by 18.8% YoY and by 7.2% during April 01, 2008 to September 26, 2008. Though some lenders and investors faced redemption pressures leading to a sale of assets, especially stocks, the Government, RBI and SEBI closely watching the situation and the country will respond swiftly according to the needs of the situation, the Finance Minister added.
Our Calling upon the depositors to banish fear, the Finance Minister assured that their deposits in banks are safe. The banks are ready and willing to provide credit, and suitable advisories are being issued to the banks, he added.
Before you sell, you must remember that for every seller there is a buyer. You must ask yourself why the buyer is buying in these times of perceived uncertainty and, therefore, ask yourself the further question whether there is a need to act in haste or in panic. In my view, there is no reason at all to act in haste or to give room for panic, Chidambaram said.
If all the players in the economy remain confident and take informed decisions, I have no doubt that the Indian economy will weather the current storm and emerge stronger, the Finance Minister added.