FM to talk steps with RBI to contain capital flows

Written by Agencies | New Delhi, January 29: | Updated: Jan 29 2008, 20:35pm hrs
Endorsing the Reserve Bank's monetary policy stance, Finance Minister P Chidambaram said he will discuss with the RBI Governor what further measures could be taken to contain capital flows.

"RBI governor will, I am sure, visit Delhi shortly and we will discuss what further policy actions need to be taken (to contain capital flows)," he told reporters, when asked about RBI Governor Y V Reddy's views that appropriate and decisive policy actions were required to manage capital flows consistent with macro fundamentals.

Chidambaram said: "We will discuss with the RBI. He (Reddy) has given only a statement."

To a query, he told reporters that the gap between interest rates in India and the US have indeed increased due to cut announced by that country's Federal Reserve.

However, there is no surety that capital flows would increase due to the US central bank's move, he said.

On apprehension of surge in capital flows due to widening of interest rate differential between India and the US, the finance minister said: "We do not what will happen yet. As I had said the cat can jump either way. There could be increased capital flows... Let us wait and watch."

There are no instant answers to these difficult questions, he said.

The central bank governor has reinforced price stability and has emphasised on credit delivery, particularly for employment oriented sectors, Chidambaram said.