India not immune to recession crisis: FM

BALANCING ACT: FM P Chidambaram says India's top concern is to moderate inflation without affecting growth.

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New Delhi: Following US Federal Reserve’s move, will the Reserve Bank of India cut rates on Tuesday? Finance Minister P Chidambaram says India's top priority is to curb inflation.

"Our concern is inflation. We have a large number of poor people in India who don't feel anything about growth. Their main concern is inflation. Our main concern is to moderate inflation without affecting growth," Chidambaram told CNBC-TV18 in an exclusive interview in Davos.

Two things that will most likely be foremost on RBI's mind when it presents its monetary policy on January 29 are: an impending US recession and a huge dollar deluge after the US Federal Reserve cut rates by 75 bps.

The Finance Minister, however, remains tight-lipped on the chances of a rate cut, while hinting that banks may need to cut their rates to beef up certain sectors.

"As a long-term policy, it is good to have benign interest rates, because that spurs growth. When I spoke to the bankers, I did not have monetary policy in mind. In fact, I said after the meeting that monetary policy may be accommodating or otherwise. But nevertheless, I urged bankers to cut lending rates so that the sluggish sectors like consumer goods, both durables and non-durables, will pickup," Chidambaram said.

What about the next big concern — taxes?

“When I begin to think about taxes, I’ll find the answers,” the FM said. “Corporate India should not be worried because it is having a good year."

The main concern across the world is the world's biggest economy heading towards a recession. Finance Minister hinted that India is not immune to the crisis and will be impacted.

“While the dollar could weaken further, the rupee would appreciate relative to the dollar and our exporters will complain. Slowdown would also have inflationary concerns,” the Finance Minister said.

Some of the impact of that possible recession has been seen in the capital markets over the last weeks, but with strong fundamentals the Indian economy may just be able to weather the oncoming storm.