Finance Minister Pranab Mukherjee on Tuesday sounded the alarm bell for emerging market economies witnessing large foreign capital inflows to take note of the threat to their financial stability.
In his inaugural address at an international conference on ‘Economic policies for inclusive development’ organised by his Ministry and the National Institute of Public Finance and Policy (NIPFP) here, Mr. Mukherjee said: “The emerging economies, though faced with brighter growth prospects, are confronting financial instability caused by international capital flows”.
Emerging economies, he said, should leverage their growth to improve social outcomes and, at the same time, monitor the financial sector. The Finance Minister’s remarks assume significance in the current environment of massive capital inflows into the emerging economies in search of higher returns which, if not absorbed, tend to destabilise currency valuations and also fuel inflation.