Govt for moderate inflows, sustainable growth: FMBS Reporter & Agencies / Mumbai October 26, 2007Finance Minister P Chidambaram today said the government wants to moderate capital inflows without hurting growth.Speaking to reporters outside his office at North Block here, Chidambaram suggested that if required, the government would not hesitate to take more measures to curb surging capital inflows. However, he also made it amply clear that any such steps will have to wait for analysis of the results of the recent decision to curb P-notes. Chidambaram returned to India today morning after an overseas tour that saw him visit the United States and Norway."I have said one of the concerns is a very strong increase in capital flows. Without hurting investment, we would like to take some measures to moderate inflows. Some measures have been taken by Sebi. We would like to wait and see what their impact is on capital inflows", Chidambaram said."As a byproduct, Sebi has also acheived the objective of greater transparency. It is a welcome by-product", he added.Asked if capital flows had moderated, Chidambaram said: "We cannot take stock on a day to day basis.Sebi on Thursday had stuck to its ground on the issue of restricting participatory notes (P-notes) and virtually retained all the clauses that were put up for public comment last week. Accordingly, foreign funds will have to register in India before investing in P-notes or sell their holdings within 18 months. The new rules will be enforced with immediate effect. The regulator also barred the issuance of P-notes tied to derivatives.P-notes are securities linked to equities used by investors who cannot trade directly in the Indian market. Last week, Sebi had suggested restricting their use to curb burgeoning capital flows into the country.In the spot market, foreign institutional investors (FIIs) will not be allowed to issue P-notes that were more than 40% of their assets under custody. The
