Capital inflow needs innovation: FM

Finance Minister P Chidambaram today reiterated that India has a problem of enormous capital inflows.

"This is a complex new situation for us. We welcome capital, but we must learn to manage it and how to absorb it. We need to put in place appropriate regulations and risk management systems," he said early today at a global gathering of Fortune 500 companies here.

The comments came a day after Prime Minister Manmohan Singh also told the same gathering that the India story looks good.

"This was what we dreamt of in 1991. I doubt whether Fortune would have considered hosting such an event in India even a decade ago. The fact that you are all here today is proof of your faith in the abilities of our people. Be it foreign direct investment (FDI), investments in our stock markets, investments in our knowledge economy, the signals are all positive. We will work to keep these positive. I hope you will remain engaged and committed to India."

Chidambaram added that in his recent visit to the United States, he had come to the conclusion that perhaps one of the reasons why the sub-prime crisis hit the United States economy was because "regulations fell behind innovation".

"We don't want (India's) regulations to fall behind innovation," the Finance Minister added.

Commenting on trade, Chidambaram said that there are some aspects of globalisation that worried the country.

"The rise of protectionist tendencies in some advanced economies worries us. Even as we find tariff barriers being reduced, we also find new non-tariff barriers being erected," he said.

The Finance Minister added that the country's investment to GDP ratio will rise to 40 per cent by 2011-12.