RBI Guv: Indian financial market not vulnerable to global slowdown

There seems to be more trouble in store for Manmohan Singh's government as the RBI governor Y V Reddy has rejected the suggestion that the Indian financial markets are vulnerable to global turbulence in economies. Amid fears of global slowdown and its adverse impact on the world economy, the Reserve Bank of India (RBI) today averred that Indian financial market is not vulnerable to overseas developments.

This view of India's premier financial and banking institution has come at a time when the UPA at the centre has been saying that the uncontrolled price rise in the country is the result of the global phenomenon of soaring inflation.

Speaking at the World Leaders Forum in the city on Tuesday, the Reserve Bank of India (RBI) Governor Y V Reddy said, "The securities and foreign exchange markets, have been stable in India and, in our view, they may not be vulnerable in terms of direct and first-round effects (of global slowdown)."

On the other hand, only a couple of days ago, Finance Minister P Chidambaram attributed the rising inflation, which touched 7.41% mark for the week ending on March 29, to the global price rise. He had cited the land use policy of the US, in particular, responsible for the surge in prices in India. With today's statement of the RBI chief the economic confusion prevailing in the country is only expected to deepen further.

However, Reddy seems quite convinced about the relative strength of the Indian economy, as he said, "In our assessment, the Indian financial sector is likely to be less affected by the contagion than most other emerging market economy (EMEs), in respect of first-round or direct effects." He also added that the Indian equity markets have been volatile in the recent months and that has some impact on changing sentiments.

Referring to the current turbulence in the market, the Governor of the 'banker's bank' said, India has not been contributing in the global macro economic imbalances, "though it has a stake in how the issues get resolved in the near future."

Although, he added, the huge forex (foreign exchange) reserves of USD 300 billion were being managed by the apex bank of the country as per the International Monetary Fund guidelines. (Based on PTI Reports)

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