Unfazed by the global financial crisis, Finance Minister P Chidambaram today asserted that fundamentals of the Indian economy are strong and that savings in banks are "completely safe".
He admitted there is a liquidity crunch in the market and that the economy was facing 'spill over and ripple effects' of the global storm but assured the country that the RBI was ready to take further steps and infuse more liquidity if necessary.
Chidambaram was confident that the country can weather the storm and appealed to all the players in the economy to cooperate with the government in the task.
In an interview to PTI, the Finance Minister said, "The weekend is a good time for people to reflect. Firstly, those who have money... There have been wage increases for the government servants, and many have received Diwali bonuses. Those who have money should spend some money and should save some money. Savings in banks are completely safe. Our banks are well regulated and well capitalised. Depending on your risk threshold you can save in some other instruments. Someone with a low risk threshold should save in a bank," he said.
The Finance Minister's remarks assume significance in the backdrop of a crash in the stock markets, led by bank scrips, that prompted RBI to cut Cash Reserve Ratio by 100 basis points to release about Rs 40,000 crore in addition to Rs 20,000 crore unlocked on Monday.
Secondly, the Finance Minister said those who need money for running their businesses, trade and firms, the government recognised that there is a liquidity crunch. "But we have responded swiftly and we have infused a huge amount of liquidity. Between now and October 25 or so, a huge amount of liquidity will find its way into the market through CRR cut, fertiliser subsidy, additional spending on National Rural Employment Guarantee schemes and payment to banks for loan waiver," he said.
Besides, the RBI is ready to take further steps to infuse more liquidity, if necessary, he added.
On deposits in banks, Chidambaram said "no depositor need have any reason to worry. Different investors have different risk profiles. But if you are an investor you should take informed decisions. The last thing you should do is to act in haste. The last thing you should do is to give room for panic."
He maintained that the fundamentals of the real economy were strong. "If you ask me whether the fundamentals of the economy have changed so dramatically as shown in the stock market, the answer is no."
In fact, Chidambaram said that some promoters were buying shares this time. Therefore, no investor needs to take any decision in haste or in panic. "He or she should take informed decisions."
On the current global meltdown, Chidambaram said there was a storm blowing in the world. "We did not not create the storm. We are facing the spillover effects or the ripple effects of the storm.
"We must brace ourself and weather the storm. I am confident that the Indian economy is strong and resilient to weather the storm and I would request all players in the economy to cooperate with the government in weathering the storm," he said.
"The weekend is a good time to calmly reflect on the situation," he said.
The minister said inflation was inching down and huge capacities were being added. "Our regulators are vigilant and any citizen of India should reflect calmly on the way we should weather the storm."
On a query, he said the export and import growth was 35.1 and 37.5 per cent respectively in dollar terms.
