As the Sensex zoomed to an unprecedented high, Finance Minister P Chidambaram sought to bring more Diwali cheer, claiming on Friday that recent steps taken to boost India's economy are yielding results. Foreign investors continue to retain faith in the Indian economy, he said, revising the current account deficit target downwards for the current fiscal.
Overseas investors have been buyers for 20 consecutive sessions till Thursday, bringing their total buying to nearly Rs. 17,900 crore in the period. The surge in liquidity sent the Sensex to a life-time high today. The 30-share benchmark smashed its earlier record of 21,206 registered in January 2008. (Read: Sensex hits new high)
"The current account deficit is well under control and we are confident that we will adhere to the red line on fiscal deficit," Mr Chidambaram said.
The Current account deficit or CAD has been a major worry as the single biggest reason why the rupee hit a record low this year and the revision will bring relief. Mr Chidambaram said with a sharp pick-up in exports in the last three months and a sharp reduction in gold imports, there was a chance that the CAD this year would be lower than today's estimate of $60 billion of the GDP. The government had earlier targeted containing CAD at $70 billion dollars.
Strong core sector growth, with strong monsoons and healthy exports, augurs well for growth, the Finance Minister said.
He strongly backed the efforts of new RBI governor Raghuram Rajan to contain inflation and stabilize the rupee and said, "the rupee has by and large stabilised, though in my personal opinion it is still trading above its appropriate level. The stability in currency markets will give comfort to take more measures."
Mr Chidambaram's comments come on a day when the Sensex hit a record high, breaking a record that stood for nearly six years. The broader Nifty closed above the 6,300 mark for the first time since November 2010.
The markets seem to have welcomed the RBI and the government's measures, Mr Chidambaram said.
However, the finance minister also cautioned investors against excessive exuberance over market rally.
(Also read | Sensex at new high: 5 reasons why you should be cautious)
Mr Chidambaram said inflation and reviving investment were the key challenges before the government, but added that there has been green shoots in investment.
"I am confident that measures taken by the RBI and our own measure of maintaining fiscal deficit will bring moderation in inflation," he added.
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