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Govt warned against using FI funds to stabilise capital market

Economist P R Brahmananda has warned against the utilisation of the financial institutions's funds to stabilise the capital market.

Speaking on the Union Budget at the Federation of Karnataka Chambers of Commerce and Industry in Bangalore on Tuesday, he said banks would be indirectly involved in the process and that the market might collapse, like in the East Asian countries.

Stating that inflation would touch 10 per cent on account of the budgetary proposals, he said the Budget did not mention borrowings from the Reserve Bank of India. "This was an open invitation to unlimited inflation," he said. He urged Parliament to guard against it.

Referring to the impact of the sanctions imposed by some countries in the wake of the nuclear tests, he said it was expected to be in the order of $ 3 billion.

The sanctions imposed by the United States, Japan and Germany were more important. "We are close to a crisis" as an increase in the outflow would have an impact on the foreign exchange reserves, he added.

With the US economy being the most stable in the world, the investments from non-resident Indians might not be on the expected lines. Stability of the exchange rates was also important for the inflow of funds, he said.

UNI