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Terming today's market crash as "transient and temporary", Finance Minister Arun Jaitley said both the government and RBI are watching the situation and hoped it will stabilise as domestic macroeconomic indicators remain strong.
Jaitley attributed the biggest ever drop in the benchmark Sensex to external factors and said that India is among the fastest growing economies of the world and the government is taking steps to further strengthen it.
"There has been for the last few days a great amount of turbulence in the global markets. Obviously, that turbulence has had impact on Indian market itself. The factors responsible for this are entirely external.
"There is not a single domestic factor in India which has either contributed or added to it. These are external factors. I have not the least doubt that this turbulence is transient and temporary in nature. Markets will settle down", he said.
In the worst-ever crash in stock markets, Sensex on Monday plunged by 1,624.51 points at 25,741.56 -- its lowest level since August 2014 -- and nearly Rs 7 lakh crore got wiped out from the investors' wealth.
Besides, the rupee today fell most in 23 months to hit a two-year low at 66.64 against the US dollar.
Speaking earlier in the day, RBI Governor Raghuram Rajan said the central bank has resources to deal with the rupee volatility.
The government and RBI are closely watching the situation, Jaitley said, adding that efforts would be made to further strengthen the economy to deal with the impact of global developments.
"Our fiscal deficit figures are under control. Inflation is very much under control. We stand by the growth projections which we made at the beginning of the year and indirect
taxation data actually supplements the idea of those projections," he said while addressing a conference of Chief Commissioners and Director Generals of Customs, Central Excise and Service Tax.
The Economic Survey presented by Jaitley in February had projected a growth rate of 8.1 to 8.5 per cent for the current financial year.
Observing that the indirect tax collections improved by 14.6 per cent in the April-July period after discounting for fresh revenue initiatives, the Minister said Indian economy is in a revival phase though challenges exist as far as global developments are concerned.
The total indirect tax collections during the first four months of the fiscal rose by 37 per cent.
On the global front, Jaitley said developments like the possibility of US Federal Reserve cutting rates, crisis in Europe and devaluation of the Chinese currency will have implications on India.
"Today, we are faced with multiple challenges... as trends come up almost by the day... you can have an economy in Europe which is facing crisis."
"And obviously being part of the globally integrated economy, this would (have) at least some transient impact as far as we are concerned," he said.
He added that all the concerned authorities, including the government and Reserve Bank "are watching the situation very closely and (are) conscious of the responsibility, as what is to be done."
As far as India is concerned, the minister said, "Our response at this stage is very clear. We have to strengthen our own economy. We have embarked upon a path for one year and a quarter... even in the midst of global slowdown India should emerge as one of the fastest growing economies in the world."
Observing that domestic indicators are extremely positive, Jaitley said, "Once these transient trends are over, markets, particularly in India, will settle down... they will restore back."