Nothing to worry about: Sinha

Our Banking Bureau

Mumbai, Sept 12: Union finance minister Yashwant Sinha on Wednesday said that the terrorist attack on the US would not have any adverse impact on India’s economy.

Union finance minister Yashwant Sinha addresses a gathering in Mumbai on Wednesday

"So far as the long-term impact on the Indian economy is concered, we do not expect any adverse impact as our economy is not a major player in the world markets. Developments on the domestic front are far more important than developments in international sector," Mr Sinha said, adding that the country is already facing poor industrial output growth.

"There are two major areas of concerns in our economy -- poor export performances on the back of a global slowdown, and the stock markets especially as far as technology stocks are concered -- irrespective of the recent developments (attacks) in the US," Mr Sinha noted.

Meanwhile, the indices in the stock markets fell considerably due to selling pressure in the wake of terrorist attacks. The Bombay Stock Exchange (BSE) index crashed below 3,000 points. "The pressure in the bourses is due to the sudden shock," Mr Sinha asserted.

On foreign exchange market, Mr Sinha said, "The rupee responsed on a daily basis to the laws of demand and supply, and there are problems in the supplies of dollar recently."

The rupee plumetted to a new low due to renewed dollar demand. However, Mr Sinha asserted that large foreign currency reserves would help the rupee to withstand the sudden shock.

In the aftermath of the terrorist attack in the US, there is increasing concern over oil prices in India. "India has long-term oil contracts and does not buy much on a spot basis. So, there would be no impact on the oil import bill," Mr Sinha said. Global crude oil prices increased to over $30 a barrel after terrorist strikes in the US. "The sudden surge in oil prices will not impact India in the near future as the supply contracts till November have already been firmed up. We expect world oil prices to stabilise over a period of time," Mr Sinha added.

Referring to the fiscal deficit, Mr Sinha said, "It would be our endeavour to keep this close to the target set in the budget for 2001-02". It is a difficult fiscal and the bottomlines of companies have been severely affected, but we are confident of achieveing satisfactory results. We have already initiated measures in the fourth week of June to make a turnaround", he added.

On interest rates, Mr Sinha touched upon the Reserve Bank of India’s intent for a softer interest rate structure and said that "decisions on interest rates will be taken by the RBI, if and when needed."
Mr Sinha also informed that, in a bid to arrest the industrial slowdown, the ministries have been asked to spend the budgetary allocations for investments in infrastructure projects.