No controls on FII inflows, says FM

The government today ruled out putting controls on FII inflows into the equity market as of now, but said that the Reserve Bank of India (RBI) may intervene to check the rupee appreciation if needed.

"At this time, I am not thinking of putting cap on FIIs (inflows in equity market)," Finance Minister Pranab Mukherjee told reporters at the annual Economic Editors Conference here.

This year, the FII inflows have already reached $24.48 billion. Of this, FIIs pumped in $6.11 billion, about 25 per cent of the total inflow so far, in the month of October alone.

The current levels of capital inflows, which exceed financing requirements of the current account deficit, have put pressure on the rupee, resulting in its appreciation over the last few months.

Mukherjee said the rising rupee has implications for exports.

The RBI is keeping an eye on it and will take action if needed, he added.

"We have faced similar situation in the past and have overcome it without taking recourse to some of the more stringent policy measures that are by now well known to discerning analysts," Mukherjee said.

The upward movement of the rupee against the US dollar was sharp in recent weeks as the Indian currency has climbed about 5.6 per cent since the beginning of September due to sustained capital inflows.

Mukherjee said high FII inflows help to finance current account deficit.

"I am confident that with FII inflows and forex reserves, we will be able to contain current account deficit at around 3 per cent of GDP (this fiscal)," he said.

Current account deficit is the gap between the amount the country pays to external world against what it receives from abroad, barring capital movement. It was around 3.6 per cent of GDP in the first quarter of 2010-11.

Mukherjee attributed this to higher non-petroleum imports which reflected in robust customs duty collection.

In first six months of this fiscal, revenue collections from customs jumped 66.8 per cent to Rs 63,229 crore as against the year-ago period.