Sinha sees no immediate impact on Indian economy

Our Economic Bureau

New Delhi, Oct 8: Describing the US-led air strikes on Afghanistan as "limited operation", finance minister Yashwant Sinha has said that it will not have much impact on the Indian economy.

Soon after meeting Reserve Bank of India (RBI) governor Bimal Jalan here on Monday, Mr Sinha said, "The government has already announced some measures to prop up stock markets and some more are in the pipeline. I don’t think there should be any knee-jerk reaction." He said that apart from some decline in stock market and a little pressure on rupee, "nothing else is happening. I see no reason to rush into the market." Dr Jalan, who was with the finance minister for about an hour, also said there was nothing to worry about.
He, however added, "We are watching the situation."

The RBI chief, who reportedly discussed the forthcoming credit policy with the finance minister, did indicate further softening of interest rates. He told the reporters that as of now the softer interest rate bias would continue. The US had recently cut the Fed rates by 50 basis points. The RBI is scheduled to announce the busy season credit policy on October 22.

On depreciation of rupee, Dr Jalan said the external situation was comfortable right now and orderly conditions would be maintained in the foreign exchange market. "The RBI is there to meet temporary demand and supply imbalance. We will meet it," he stressed. Dr Jalan refused to comment to a query on growth rate that had been forecast by IMF and Central Statistical Organisation to fall this year due to economic slowdown.

The RBI, in its report, had said the economy would grow at 6 to 6.5 per cent this financial year. The IMF, in its recent report had projected a growth rate of only 4.5 to 5 per cent.