High forex inflows can endanger growth: FinMin

NEW DELHI: The government on Friday warned that inflow of foreign funds was more than what the economy can absorb and was leading to appreciation of rupee, a situation that could endanger growth and price stability.

"Increased capital inflows can impact macroeconomic aggregates through the exchange rate, trade and monetary variables. This was particularly manifest in the first half of the current financial year and thus the management of capital inflows has been and is likely to remain an important issue," the Mid-Year Review 2007-08 said.

The review, tabled by Finance Minister P Chidambaram in Parliament, said that the Indian economy has been witnessing a robust growth for four years in a row now and buoyancy in the first half of this fiscal has reaffirmed continuation of this momentum.

Even as the economy has been expanding at nine per cent and above, the government admitted that growth needs to become more inclusive so that benefits of upswing could be shared by all sections of the society.

While the impetus to growth would continue to be provided by industry and services, growth in agriculture and absorption of labour in productive areas would need focused attention, it said.

Highlighting some of the key features, the Mid-Year Review said the Indian economy grew at 9.1 per cent in the first half of 2007-08 and inflation eased below four per cent after 68 weeks.

The growth has generally been inclusive, with the percentage of persons below poverty line declining from around 36 per cent of the population in 1993-94 to 28 per cent in 2004-05, it said.