New Delhi: India has strong fundamentals such as low inflation, good growth and low current account deficit so as to prevent any financial crisis, RBI (Reserve Bank of India) Governor Bimal Jalan said in New Delhi on November 23.

"A stable macro-economic environment with low inflation, low current account deficit and reasonable growth is essential to prevent crisis. India has all the three -- inflation around 3 per cent, current account deficit below 1 per cent and growth above 5 per cent," Jalan told the meeting of G-20 Finance Ministers and Central Bank Governors.

The RBI Governor said short-term banking capital should be avoided for financing investments and growth, while FDI (foreign direct investments) and portfolio investments have to be encouraged in management of the capital account.

Jalan also urged international institutions and the international community to play a supportive role by providing a higher and more automatic access to international funding to countries facing financial crisis.

Jalan said adoption of best international practices in respect of prudential, transparent accounting and related standard and codes ensure that there are no surprises about the financial health of a country or its financial policies.

The Governor also stressed on flexibility in exchange rates to enable the Central Bank to intervene if and when necessary.

The policy of building a high level of foreign exchange reserves should take into account not only the anticipated current account deficit but also liquidity at risk arising from unanticipated capital movements, he told the meeting.

"In order to prevent a crisis, each country needs to take measures to build its own safety walls by providing for a stable macro-economic environment, higher reserves, more realistic policies to regulate capital flows and careful monitoring of foreign exchange markets," he said.

"However, when a crisis does arise because of reasons outside the control of a country and where the Article IV consultation with the country have been positive and favourable, international institutions and international community must resolve to play a supportive role through a higher and more automatic access to international funding," he said.

He said this was essential since even if a country was cautious and careful, and had strong macro-economic fundamentals, it might still be affected by crisis because of events beyond its control.

PTI