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With some calm having returned to the stock and currency markets, Finance Minister P Chidambaram will meet leading foreign institutional investors (FIIs) and bankers in Mumbai on Saturday to allay fear over the subdued macro economic parameters and so-called "capital controls".
"He is meeting FIIs and chairmen of leading banks," a government official said, adding the minister would return to Delhi by the evening.
Chidambaram is likely to reiterate that there is no intention of the government to impose capital controls. And, that last week's measures by the Reserve Bank of India were aimed at reducing volatility in the markets and quelling speculation on the rupee.
He might also stress that the current targets of the Centre's fiscal deficit at 4.8 per cent of gross domestic product and the current account deficit at 3.7 per cent for 2013-14 were limits; the government might even better these.
The meetings come in the backdrop of the finance ministry trying to convince the markets of the need to avoid panicky reactions to developments in America over the latter's quantitative easing plan.
As the rupee breached 65 to the dollar before recovering on Thursday, the finance minister had said the Indian currency had overshot what was generally believed to be a reasonable and appropriate level. "We are confident that stability will return to these markets and we can get on with the task of promoting investment and growth," he had said.
Assured by both the finance minister and RBI governor D Subbarao, both the stock and currency markets saw some semblance of normalcy on Friday. The BSE's benchmark Sensex index gained 206 points to end at a one-week high and the rupee rose 2.1 per cent against the dollar, its biggest jump in nearly a year. It ended six days of losses. After bouncing back from an all-time intra-day low of 65.56 on Thursday, it closed at 63.40 to a dollar on Friday.
However, the RBI governor had said the central bank was not looking at any particular level for the rupee; it would only curb the volatility. He had said the central bank could not allow the rupee to overshoot either, since it then would become difficult to bring back the currency to the original level.
Subbarao had also said there was enough foreign exchange firepower to stabilise the rupee. The country's forex reserves were up by $205.8 million to $278.81 billion in the week ended August 16.
Chidambaram is also likely to reiterate that the first quarter GDP growth for this financial year might be flat but would recover from the second quarter. India's GDP grew 5.4 per cent in the first quarter of 2012-13 and the numbers for April-June, 2013-14 are slated to come on August 30. The GDP rose 4.8 per cent in the fourth quarter of 2012-13 and 4.7 per cent in the third quarter. If the growth is in this range, this would be the third quarter in a row when the expansion would be less than five per cent.
Chidambaram's meeting with bankers comes a day after he had admitted to a rise in non-performing assets of the banking sector. He had also said the government was making efforts to push stalled projects.
All state-owned banks have a capital adequacy ratio higher than the Basel norms and the government intends to infuse Rs 14,000 crore this financial year to capitalise these, Chidambaram had said, to allay any fears over the strength of public sector banks.
