JOIN USAs the slow global economic recovery and festering European debt crisis threatens to affect India through trade and financial channels, Finance Minister Pranab Mukherjee on Tuesday sounded a note of caution against any complacency on the fiscal front and said the country should be ready to confront external shocks.
The slowdown in demand from India’s traditional markets of US and Europe has already led to deceleration in export growth in the recent months with the current account deficit widening to over 3.5 per cent of the gross domestic product. “Any complacency can turn out to be our worst enemy. We need to be ever ready to confront external shocks and respond on a real time basis,” Mukherjee said at a CII event.
Weak external factors have also led to the moderation in the level of foreign institutional investment flows resulting in a decline in the equity indices and a sharper depreciation of the rupee. The rupee depreciated 16 per cent against the US dollar in 2011. The FIIs have made a net investment of only Rs 322 crore in the equity market in April this year after pouring in a record Rs 44,000 crore in January-March period, according to Sebi data.