Post-US downgrade, India can attract global capital: Basu

Weakening of investor sentiment following the US rating downgrade is an opportunity for India to attract global capital that is in search for "safe havens", the Chief Economic Advisor told the Finance Ministry today.

"If anything, I feel if we can strengthen our economy; we could provide some safe haven which the global capital is bound to look for," Kaushik Basu told reporters after attending a Reserve Bank's board meeting here.

"Another thing you have to keep in mind is that as a consequence (of the US downgrade), India's relative rating goes up," Basu added.

The Chief Economic Advisor further said though the downgrade is a "bit of global worry", India's prospects are unaffected in the medium-to-long-term as a fallout of it.

India attracted nearly USD 30 billion in inflows in 2010, most of them in equity markets as global money chased lucrative bets happening in emerging markets like India.

However, with signs of economic recovery in the developed world, a flight of capital out of the country had also led to concerns being expressed, especially on the current account front.

Ratings agency Standard & Poor's had downgraded the US to AA+ from the top notch triple A last Friday, leading to apprehensions about the impact of this development on India, one of the fastest growing major economies. Domestic markets bled in the first two days of the week, along with their peers across the world, but have since shown signs of improvement.

Basu said the markets had priced-in a cut in the US rating even before it was announced as everybody was aware of the developments like the Obama administration's difficulty in getting the debt bill passed. 

Basu reiterated that the government is "very serious" to meet its budget targets on the three important parameters of fiscal deficit, revenue deficit and its total borrowing.

"On the three most important targets of fiscal deficit, revenue deficit and borrowing, we are trying our best to keep the consolidation on track," he said, adding meeting these fiscal targets are not easy.

In his Budget speech, Finance Minister Pranab Mukherjee had announced targets of 4.6 per cent fiscal deficit and a revenue deficit of 3.1 per cent and government borrowing at Rs 3.4 trillion for the current fiscal.