Chidambaram hears out FIIs, banks; promises action

Assures investors that the govt is in control of the economic situation

Finance Minister P Chidambaram on Saturday reassured representatives of foreign institutions and banks that the government was on top of the ongoing economic situation. In two separate meetings with foreign institutional investors (FIIs) and banks at a hotel in Mumbai’s western suburbs, Chidambaram along with economic affairs secretary Arvind Mayaram and Rajeev Takru, secretary department of financial services, sought feedback from the participants about their concerns over what was happening in the country’s financial markets.
 

FIIs were eager to know what new steps and policy action the government is taking to ensure stability in the market, said four people who were part of the meeting.  These investors also sought the finance ministry’s views on flagging growth, rupee fall, current account deficit (CAD), interest rate direction and issues impeding investments. 
 

 

The Finance Minister assured FIIs that once the rupee’s slide was curbed and stability returns to the currency markets, interest rates would start falling, said a person who attended the meeting.
 

“The Finance Minister also assured us that CAD and fiscal deficit would come under control soon,” the person said.  Chidambaram is said to have told FIIs that the disinvestment of its holdings in Specified Undertaking of UTI (SUUTI) is in the offing. SUUTI-—the restructured unit of the erstwhile UTI- holds shares of ITC, Axis Bank and Larsen & Toubro.

The FII meeting was facilitated by foreign brokerages including Citi, Goldman Sachs, Morgan Stanley and Deutsche Bank. Executives who attended the meeting said Chidambaram was mostly listening to the participants and were encouraging suggestions from them.
 

Chidambaram asked for feedback from FIIs on the measures that were needed to improve sentiment and fix the CAD by attracting more capital flows, said another person pricy to the matter.
 

Among other things, FIIs asked the government to remove all the limits and restrictions on FII debt. Also, they asked the government to list on JP Morgan global debt index to attract long term foreign flows. 
 

Investors said the finance ministry that the hardening of US bond yields is affecting overseas flows. They cautioned that if the yields harden further we could see more outflows. 
 

“One has to keep an eye on what the US Fed is doing.  US Fed's meeting on September 15 will be important,” said the second person who attended the meeting.
 

In a separate meeting with banks, Chidambaram, Mayaram and Takru assured exeutives that measures to attract more deposits and government clearances of large projects were underway.“The discussion was about how we can improve the dollar flow in the country. It was just an exchange of ideas between the leading banker who have more foreign offices and who have more NRE/FCNR deposits,”  V R Iyer, chairperson and managing director of Bank of India. “They have noted our views and they will look into the matter and get back.”
 

Iyer said bankers emphasized the need for a boost in exports in the wake of the fall in the rupee and the trade deficit.

“It should be deputed as a priority sector advance. There can be more focus and exporters can be given more sops for the direct and indirect taxes,” she said.
 

The chief executive of large public sector said some suggestions in were increasing ceiling on export refinance and introducing short term NRI deposits.
 

After the meeting, Takru told reporters that many of the suggestions would be considered.“There were lot of discussion. Lot of good ideas came out. And I think you should see something coming up shortly, next 8-10 days,” he said.
 

Takru said, in last one month, 27 different projects have been cleared with timeframe. “These are all large projects. And I think, within the next week 9 projects are coming for final decision before the cabinet..there is power, there is surface transport,” he said.