Indian problem is liquidity, not solvency: Kamal Nath

NATH SPEAK: The minister says that India's problem is not solvency, but liquidity

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New Delhi: While the world rallies together to combat the economic crisis, Indians worry about their economic future too. Commerce and Industry Minister Kamal Nath reassures that though there is no boom about to happen in the markets, there is no reason to project a gloom either.

P Chidambaram’s pep-talk about a strong Indian economy rallied the Indian markets on Monday. The government was able to calm the panic on Sunday, October 13 after days of crisis. CNN-IBN asked Commerce and Industry Minister if the worst is over and what is in the pipeline.

“I can’t say there's going to be a boom, but there's not going to be a gloom either, the kind of gloom that's been projected. Let's recognise that our exports are going up by over 30 per cent. Let's recognise that we've had a 120 per cent increase in FDI over the last year, even if we take the figures two months ago. So FDI is rolling in. Obviously if there is going to be a cash crunch, there is going to be a liquidity issue, internationally, that may, I am using the word may, I am not saying it will, affect FDI inflows in the long run, after 6 months. But I still expect to achieve targets of FDI that we have set for this year. I still expect that we will meet our export figures, our export targets which we have set. We are very much on track. In fact this whole year, from March to today has seen in excess of 25 per cent exports,” said Nath.

The markets have taken quite a beating and the government must now be planning more measures to ensure liquidity in the market.

“There was a tightening of liquidity which was deliberately done by the Reserve Bank, because of the inflationary aspects. Inflation was hovering around 12 per cent. It was necessary for us to contain the money market. But now with the changed situation, of course the CRR has been reduced by 1.5 per cent and steps are being taken to ease liquidity. The issue is liquidity. The issue is not solvency. Steps taken by government are mechanisms, and these mechanisms must bring in more liquidity in the market. So the Indian problem is liquidity,” provided Nath.

But it's not just liquidity clearly as India witnesses low industrial growth, a really weak rupee, and inflation is not completely contained. Many believe that the government is simply putting a gloss on what seems to still be a full blown economic crisis. But the Commerce and Industry Minister disagreed.

“Well, I don’t think there is a full blown economic crisis. Our fundamentals continue to be strong, though the stock market has gone down. All the ingredients in our economy are very strong. Stock market went down because of different reasons. And I think the Indian economy has the resilience and strong fundamentals to weather this out,” added Nath.