As FIIs batter stock markets, Finance Minister Pranab Mukherjee today assured investors that India is a safe bet. He also said that the fundamentals of the Indian economy are strong, exhibited by strong GDP numbers, tax collections, investment and saving rates, and that stock markets should be seen in the context of developments around the world.
FIIs were net sellers in equities market today as well, selling stocks worth $92.93 million, even as equity-sensitive index, Sensex, closed 70 points higher, after closing in red for the previous five days.
“In the past few days, there has been some volatility in capital markets, led by continued selling pressure from the FIIs. While the stock market has its own mind and it takes cues from developments around the world, I want to take this opportunity to reiterate the strong fundamentals of the economy,” Mukherjee told reporters here in a hurriedly-called briefing.
Rolling out numbers, the finance minister said GDP for 2009-10 has been revised up to 8 per cent from 7.4 per cent estimated earlier and GDP for the previous year has been raised to 6.8 per cent from 6.7 per cent calculated earlier. “More importantly, both savings and investment rates have shown a strong rebound in 2009-10 over the preceding year. This augurs well for sustaining high growth of the economy in the medium to long term,” he added.
Even then, the finance minister said he is sticking to the growth estimate of 8.5 per cent for this financial year. The mid-year analysis of the economy pegged economic growth at 8.75 per cent this financial year. The economy grew by 8.9 per cent in the first two quarters.
“In the first half of the current fiscal, broad-based GDP growth at 8.9 per cent has taken the economy back to the pre-crisis growth movement,” he added.
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Mukherjee also rolled out tax figures to butress his point that India is on a strong wicket. “...gross tax collections up to December 2010 show a 27 per cent increase over the corresponding period of 2009-10, with customs and excise duties recording a growth of 66 and 37 per cent, respectively.”
These numbers suggest that manufacturing activity is on a strong growth path, in spite of monthly fluctuations in the Index of Industrial Production, he said.
Industrial growth plunged to 18-month low of 2.7 per cent in November, but core sector growth of 6.6 per cent in December against 3 per cent in the previous month indicate that industrial numbers would pick up in December.
Pointing out that both fiscal as well as revenue deficits are well below the levels recorded in the corresponding period of last year. The Centre’s fiscal deficit fell 44.75 per cent to Rs 1,71,249 crore till December this financial year, from Rs 3,09,980 crore a year ago, while its revenue deficit came down by 53.70 per cent to Rs 1,16,309 crore from Rs 2,51,254 crore a year ago.
Mukherjee also expressed confidence that inflation will moderate from December’s level of 8.43 per cent, while admitting that there may be fluctuations in the rate of price rise in the next three months.