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Capital inflows thumbs up to eco; not worry yet: Chawla

Press Trust of India  |  New Delhi 

The government today said high capital inflows are a sign of "thumbs up" to the Indian economy and not a cause for concern at current levels, even as it was keeping a tight watch on the situation.

There is no overheating of the economy and so far the inflows are good and on expected lines, Finance Secretary Ashok Chawla said.

"...(there is) no overheating in the economy. Inflows is something which keep moving up and down... It is thumbs up so far as Indian economy is concerned (and) they are not unanticipated," Chawla said in an interview to a private channel.

He said, however, the government was keeping a close watch on the inflows.

Financial experts widely believe that excessive foreign capital inflows need to be monitored carefully because they have the potential to cause harm to a country's economy in case global investors decide to pull out in a big way.

"The RBI is watching the situation, Sebi is (as well). We (too) are keeping a tight watch on what's happening. Our estimation is (that) at this point in time there is still no cause for worry," Chawla said.

Betting high on the Indian equity market, foreign institutional investors (FIIs) have infused a record $17.88 billion (Rs 82,158 crore) in local stocks so far this year.

The net purchase of $17.88 billion is the highest ever investment by overseas firms in a single year in dollar terms. The current inflow has surpassed the record level of $17.65 billion in domestic equities during 2007.

Significantly, this huge inflow of $17.88 billion has come in just nine months of 2010.

Last year, FIIs were net buyers of shares worth Rs 83,423 crore ($17.45 billion), the previous high in dollar terms in the Indian equity market.

First Published: Tue, September 28 2010. 21:10 IST