Financial sector reforms must go ahead: Montek

Planning Commission deputy chairman Montek Singh Ahluwalia says that India must push ahead with financial sector reforms, which will not destabilise growth; and the country can absorb a welcome rise in foreign investment flows. Any move to stop reforms ''would be a serious mistake'', he said.

Ahluwalia's statements come just a day after finance minister Pranab Mukherjee said insurance and pension reforms would not be possible without a consensus among the ruling parties.

Addressing the annual economic editors' conference, Ahluwalia said a rise in foreign investment flows into Asia's third-largest economy was good, but authorities would keep a vigil on short-term debt flows.

"I think we can absorb those foreign investment flows. Obviously we will remain watchful on flows of short-term debt and so on, but a revival of foreign investment flows is very welcome," he said.

Between April and September, the first half of the 2009-10 fiscal year, foreign direct investment was in excess of $15 billion and portfolio investment were almost the same, trade and industries minister Anand Sharma said at the same event.

The influx of foreign funds is also pushing up the rupee. The Reserve Bank of India has said there was a risk that if it raised interest rates ahead of other central banks, it could attract more inflows and complicate policymaking.

Ahluwalia said the country would miss the earlier target of 9 per cent annual growth between 2007-08 and 2011-12 as the global slump and the weakest monsoon in four decades hit output. "Obviously, if for two years you have lower growth there will be revision (in the growth target)," Ahluwalia said.