NEW DELHI: Finance Minister P Chidambaram on Monday said liquidity was the root cause of the current uncertainty. He maintained that the Indian economy was growing at a satisfactory rate and there was no need to panic.

"In this time of uncertainty, facts cannot be ignored, “he said adding the Indian economy is continuing to do well and the country's GDP growth was being seen at 7.9% for the current fiscal.

Chidambaram said, "The root cause of uncertainty is liquidity and not any fundamental change in economy. Liquidity was found to be inadequate. Lenders were unwilling to take risk. They are faced with redemption issues.”

He added that market problems, in terms of capital markets, money market and forex market can be overcome. He said, “RBI has infused Rs 60,000 crore into the financial system and Rs 91,500 crore has come through the LAF window. This should help ease pressures that have built up in last few weeks.”

He said that indices are not the only indicators of economic health.

"The services sector is growing at a brisk rate while crude oil and commodity prices are declining sharply," he said. "The fall in commodity prices will have a major impact on the current situation."

"The government, RBI and Sebi are in close consultation with each other for the last few days, watching the situation carefully and responding swiftly.  We are working on more measures to make credit intermediations smoother," he said.

On being questioned by the media to divulge details on the measures, the FM said that a statement will be issued outlining the measures soon.

While speaking on the current insecurity regarding the banking sector in India, he said "Our banks are ready and willing to provide credit. Suitable advisories are being issued to the banks to help them out.”

On the global financial crisis, the FM added, "The US and UK governments have announced bailouts, Australia and East Asian markets opened in the green and India should take a cue from them. We need to be confident, cool and banish fear. Deposits in bank are safe and there is no need to act in haste or give room for panic.”

He urged all players in the economy to remain confident saying the Indian economy will weather the current storm with ease.

Also Read

RBI may now slash repo rate: Bankers

RBI cuts CRR by 150 bps to 7.50%

Ready to inject more cash into mkts: FM