Finance Minister P. Chidambaram Friday reiterated that the fundamentals of the Indian economy were strong, and set up a high-level group to look into the liquidity requirements following the mayhem in the capital market.

The government admitted liquidity was the main problem, a fact reflected in India's central bank - Reserve Bank of India - Friday morning cutting the cash reserve ratio rate (CRR) by another 100 basis points to 7.5 percent.

"Credit is the lifeline of trade and business, hence, it is important that credit continues to flow to all sectors of the economy," Chidambaram said in a statement read out to the press by Finance Secretary Arun Ramanathan here.

Ramanathan, who will head the high-level group, said the government was keeping a tab on the capital market and would do what was necessary to maintain capital flow.

"We are alert and alive to the situation... the RBI is keeping a close watch on the situation," Ramanathan told reporters.

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