‘US Fed tapering will not have big impact on India’
20 Dec 2013 5:44 AM IST
‘We are better prepared than in May 2013 to deal with consequences, if any, of the US Fed Reserve's decisions.... I think the consequence should not be large. Even if there are some consequences then I think we are better prepared,’ he said.
The minister was reacting to the US Federal Reserve's announcement on Wednesday on reduction of monthly bond purchase to $75 billion from $85 billion from January. ‘If any other policy actions are required, we will respond. At the moment all that we have announced are having an impact,’ Chidambaram said.
Chidambaram said the government is of the view that markets have already factored in the US Federal Reserve's decisions and ‘therefore is not likely to be surprised by these moderate changes’.
The Finance Minister spoke to Reserve Bank Governor Raghuram Rajan and discussed about the likely impact of US tapering on India. Chidambaram also said India has increased the quantum of bilateral currency swap arrangement with Japan from $15 billion to $50 billion, a move which will help stabilise rupee exchange rate. ‘We have to wait to see what they (US) do with the interest rates. Fed says interest rates will continue to be kept low,’ he said.
Expressing its confidence, India Inc said that the tapering will not hit Indian economy as the country’s foreign exchange reserves are stable and the current account deficit (CAD) for this financial year is likely to be sustainable.
‘India is now definitely in a better position to manage its balance of payments as the government and RBI have taken effective steps to build up forex reserves and render stability to the foreign exchange market,’ Ficci President Naina Lal Kidwai said.
As QE is eased from monthly $85 bn to $75 bn, Sensex dips 151 pts
Mumbai: The benchmark Sensex fell 151 points on Thursday after the US Federal Reserve decided to taper its monthly bond-buying programme, raising concerns that funds available for investing in emerging markets would be reduced.
Banking, capital goods and oil & gas stocks declined the most while IT, teck, pharma and metal shares advanced. IT shares were in the limelight on expectations of the economy recovering in the US, their biggest market.
ICICI Bank, HDFC and HDFC Bank were the biggest drag on the index, while Infosys and TCS lifted it.
Starting next month, the US central bank will cut its purchases of bonds to $75 billion from $85 billion, according to a statement after the Federal Open Market Committee on Wednesday.
The committee expects that with appropriate policy accommodation, economic growth will pick up from its recent pace and the unemployment rate will gradually decline. The 30-share S&P BSE Sensex opened on a strong note and touched a one-week intra-day high as Asian stocks firmed up on the Fed decision. However, increased fears about the impact of the US tapering programme took the index to the day's low of 20,646.03, a drop of almost 214 points.
The Sensex recovered some ground and closed at 20,708.62, a fall of 151.24 points or 0.73 per cent.
‘Emerging market economies (EMEs) have been caught off guard on the timing of the Fed decision, as consensus seemed set on March 2014. Chances of a capital flight to the US and a strong dollar are real, and EMEs could suffer as higher-than-expected equity and debt outflows can materialise than already priced in,’ Ashish Kumar, Economist at Elara Securities, said in a report.
The minister was reacting to the US Federal Reserve's announcement on Wednesday on reduction of monthly bond purchase to $75 billion from $85 billion from January. ‘If any other policy actions are required, we will respond. At the moment all that we have announced are having an impact,’ Chidambaram said.
Chidambaram said the government is of the view that markets have already factored in the US Federal Reserve's decisions and ‘therefore is not likely to be surprised by these moderate changes’.
The Finance Minister spoke to Reserve Bank Governor Raghuram Rajan and discussed about the likely impact of US tapering on India. Chidambaram also said India has increased the quantum of bilateral currency swap arrangement with Japan from $15 billion to $50 billion, a move which will help stabilise rupee exchange rate. ‘We have to wait to see what they (US) do with the interest rates. Fed says interest rates will continue to be kept low,’ he said.
Expressing its confidence, India Inc said that the tapering will not hit Indian economy as the country’s foreign exchange reserves are stable and the current account deficit (CAD) for this financial year is likely to be sustainable.
‘India is now definitely in a better position to manage its balance of payments as the government and RBI have taken effective steps to build up forex reserves and render stability to the foreign exchange market,’ Ficci President Naina Lal Kidwai said.
As QE is eased from monthly $85 bn to $75 bn, Sensex dips 151 pts
Mumbai: The benchmark Sensex fell 151 points on Thursday after the US Federal Reserve decided to taper its monthly bond-buying programme, raising concerns that funds available for investing in emerging markets would be reduced.
Banking, capital goods and oil & gas stocks declined the most while IT, teck, pharma and metal shares advanced. IT shares were in the limelight on expectations of the economy recovering in the US, their biggest market.
ICICI Bank, HDFC and HDFC Bank were the biggest drag on the index, while Infosys and TCS lifted it.
Starting next month, the US central bank will cut its purchases of bonds to $75 billion from $85 billion, according to a statement after the Federal Open Market Committee on Wednesday.
The committee expects that with appropriate policy accommodation, economic growth will pick up from its recent pace and the unemployment rate will gradually decline. The 30-share S&P BSE Sensex opened on a strong note and touched a one-week intra-day high as Asian stocks firmed up on the Fed decision. However, increased fears about the impact of the US tapering programme took the index to the day's low of 20,646.03, a drop of almost 214 points.
The Sensex recovered some ground and closed at 20,708.62, a fall of 151.24 points or 0.73 per cent.
‘Emerging market economies (EMEs) have been caught off guard on the timing of the Fed decision, as consensus seemed set on March 2014. Chances of a capital flight to the US and a strong dollar are real, and EMEs could suffer as higher-than-expected equity and debt outflows can materialise than already priced in,’ Ashish Kumar, Economist at Elara Securities, said in a report.
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