FM goes to Mumbai to talk directly to FIIs, Bankers

Visit comes a day after finance minister P Chidambaram assuaged markets through media in Delhi

A day after some calm returned to stock and currency markets, Finance Minister P Chidambaram will tomorrow meet leading foreign institutional investors (FIIs) and bankers in Mumbai to allay their fears over the subdued macro-economic parameters and so-called "capital controls."

"He is meeting FIIs and CMDs of leading banks," a government official said, adding he will return to Delhi by the evening.

The finance minister is likely to reiterate his point that there is no intention of the government to impose capital controls and the measures taken by the Reserve Bank of India last week were aimed at reducing volatility in the markets and quelling speculation on the Indian rupee.

He may also stress that the targets of the Centre's fiscal deficit at 4.8% of GDP and India's current account deficit at 3.7% for 2013-14 are the red lines and the government may even better them.

The meetings come in the backdrop of the finance ministry trying to convince the markets that there is no need for panic reaction to developments in the United States over quantitative easing.

As the rupee breached 65 mark against the dollar before recovering on Thursday, the Finance Minister had said that the Indian currency has overshot beyond what is generally believed to be a reasonable and appropriate level.

"We are confident that stability will return to these markets and we can get on with the task of promoting investment and growth," he had said.

Assured by both the finance minister and RBI governor D Subbarao, both the stock and currency markets saw some semblence of normalcy. The Sensex gained 206 points to end at a one-week high and the rupee rose 2.1 percent against a dollar on Friday, its biggest jump in nearly a year. It ended six days of losses. After bouncing back from an all-time intra-day low of 65.56 yesterday, the local currency closed at 63.40 to a dollar today.

However, the RBI governor had said the central bank is not looking at any particular level for the rupee, but will curb the volatility. He had said the central bank cannot allow the rupee to overshoot since it becomes difficult to bring back the Indian currency to original level then.

Subbarao had also said that it has enough forex fire power to stabilise the rupee.     

The country's foreign exchange reserves were up by $205.8 million to $278.81 billion in the week ended August 16.

The Finance Minister is also likely to reiterate the point that the first quarter GDP growth for this financial year may be flat, but it will recover from the second quarter itself. India's GDP grew 5.4% in the first quarter of 2012-13 and the numbers for April-June, 2013-14 are slated to come on August 30.

The country's GDP rose 4.8% in the fourth quarter of 2012-13 and 4.7% in the third quarter. If the growth falls in this range, this would be the third quarter in a row when the GDP expansion would be less than five%.

Chidambram's meeting with bankers comes a day after he had admitted that there is a rise in non-performing assets of the banking sector. He had, however, said the government is making efforts to push stalled projects.

All banks have a capital adequacy ratio higher than the Basel norms and the government intends to infuse Rs 14,000 crore this fiscal to capitalise the PSU banks, Chidambaram had said to allay any fears over the strength of public sector banks.