Any withdrawal of stimulus being talked about in the US will not impact capital flows into India as the country does not depend on short-term borrowings, Planning Commission Deputy Chairman Montek Singh Ahluwalia said here today.
“I think if they (US) do that, I don’t think that the expected changes in quantitative easing (QE) will make a difference to the kind of inflows that we are talking about,” he said, when asked about his comments on the recent statement of US Federal Reserve Chairman Ben Bernanke.
Bernanke’s remarks about the possibility of scaling back of stimulus with improvement in economic conditions sent the global stock markets including that of India into tizzy. The Sensex tumbled by 390 points to 19674.33 at the close of yesterday’s trade.
Tightening of liquidity
Given the importance of US on the global economy, Ahluwalia said that the reversal of the QE system would tighten the liquidity across the world.
As regards the impact on India, he added: “I am not sure that is so important for us because we don’t encourage short-term borrowings anyway.”
“What is important is that how do people see Indian economy. Do they see it well managed? Do they see it getting back to higher growth rate? Do they see ours getting rid of obstacles that held up investments,” he said.
Commenting on the issue, Finance Minister P. Chidambaram had yesterday said: “There is no need for any kind of nervousness. I am looking forward to June and the second quarter with much greater confidence. I think the Indian market should read the situation correctly rather than being influenced by something which is happening elsewhere.”