India has weathered the contagion effect: Pranab Mukherjee

Indian stock markets have handled the 'contagion effect' better than other Asian, European and American bourses, finance minister Pranab Mukhrejee said on Friday, trying to ease investor worries about the stock meltdown.

"Compared to the sharp fall in the indices in the US and Europe, Indian indices have weathered any contagion effect," said Mukherjee. "On Friday, Indian markets contracted 1.9 per cent, only around one-third of the fall seen in the US and European markets. Some of the major Asian markets saw losses of four-six per cent."

According to the minister, the present global turmoil presented an attractive opportunity for long-term investors, including foreign pension funds, wanting to raise their exposure in the Indian markets.

Mukherjee discussed the global financial crisis with D. Subbarao, the governor of the Reserve Bank of India, and C Rangarajan, the chairman of the Prime Minister's Economic Advisory Council. All three felt that the government should monitor the global situation and refrain from panicky reactions.

The finance minister admitted that the current volatility in the stock markets would delay the government's planned sales of shares in public sector units. "I am fully aware of the current volatile situation in the market, and surely not only me, any prudent finance minister would not like to dispose of valuable assets," Mukherjee said. "We cannot sell our valuable assets in a market situation where we will not get adequate prices. The whole objective is to discover the latent price."

The government is, however, working on plans to disinvest its stake in about half-a-dozen firms including Nalco. For the current fiscal, the government has set a disinvestment target of Rs.40,000 crore. It has also approved disinvestment of five per cent of paid-up equity in energy major Oil and Natural Gas Corporation Ltd and steel behemoth, Steel Authority of India Ltd.

Mukherjee maintains that the Indian economy is robust and its growth story is also intact. However, the government admits that inflation continues to remain a problem. The RBI has asserted that there is no scope for easing up the current interest rates as inflation was still "unacceptably high."