Rupee strong, FIIs here to stay, says FM

Finance Minister P Chidambaram today tried to soothe market sentiments, saying the rupee remained strong and foreign institutional investors were here to stay.

Addressing the Assocham's annual session here, he flagged financial sector and public sector reforms and changes in the accounting and corporate governance standards as areas the government intended to focus on in the coming months.

The Pension Fund Regulatory & Development Authority Bill is slated to be discussed during the winter session of Parliament, while amendments to banking laws are pending with a parliamentary standing committee.

The government is also drafting a new Companies Law.

'We promise an enabling environment for investment, promise moderate, reasonable tax rates and promise to reward enterprise and risk-taking,' Chidambaram said.

Citing the example of public sector companies in China going in for public issues worth $270 billion, he said, Indian companies, both state-owned and private, should look at public offers.

The minister said equity in Chinese companies was being sold to plug a large pension deficit and India, too, faced a similar problem. The government's plans to sell equity in blue-chip public sector companies has come a cropper in the wake of opposition from the Left parties.

Chidambaram said strategies had to be devised to push the growth rate up as China had taken a lead in manufacturing and infrastructure, and was catching up with India in services like accounting and software.

'The rupee is strong despite some nominal depreciation....If you go by the real effective exchange rate, the rupee is still a reasonably strong currency,' Chidambaram said.

Till October 18, the rupee had appreciated 4.4 per cent against the euro, 3.5 per cent against the pound and 4.3 per cent against the yen, while it only depreciated against the dollar by 3.1 per cent.

Referring to the recent FII outflows, the minister said the markets should take such developments in its stride. 'If there are inflows, there will be outflows. I am confident that we will continue to get large FII money,' he said.

Since April, FII inflows have amounted to $4.3 billion. So far in the calendar year, the inflows have been estimated at $8.2 billion. During April-August, foreign direct investment was up 20 per cent at $1.91 billion. It went up 14 per cent to $2.57 billion during January-August. Chidambaram said FDI was at its highest level since 2000-01.

The finance minister assured businessmen that the government would continue to have moderate and reasonable tax rates to create a conducive business environment.

The minister also said the rising trade deficit was not a cause for worry. 'Despite the rise in imports, we have still added a moderate amount to our foreign exchange reserves and we are on a good wicket,' he said.