US Fed move won’t have a big impact on India: FM

The minister also said that he expected the rupee to remain stable in the near term.

Written by ENS Economic Bureau | New Delhi | Published:December 20, 2013 2:57 am

In the wake of the US Federal Reserve’s decision to start tapering its stimulus,finance minister P Chidambaram on Thursday said that it would have little consequence on India,which is better prepared to deal with the move,and promised to take more measures curtail the impact,if needed.

“Government is of the view that the markets had already factored in the US Federal Reserve’s decisions and,therefore,is not likely to be surprised by these moderate changes. Besides,we are better prepared than in May 2013 to deal with the consequences,if any,of the decisions,” he said.

The US Fed had on Wednesday announced that it would reduce the $85 billion monthly bond purchase by $10 billion,starting January.

Calling it a mild reduction and pointing out that the US Fed has not announced any sequential reduction,Chidambaram further said,“If any other policy actions are required,we will respond. At the moment,all that we have announced (are having) an impact.”

Earlier in the morning,the finance minister had also spoken to Reserve Bank of India Governor Raghuram Rajan to discuss any fallout on India from the US tapering of its bond purchase programme.

The minister also said that he expected the rupee to remain stable in the near term. “We don’t look rupee-dollar rate every hour. We look at it over a period of time. Over a period of time,rupee was stable and we expect it to remain stable.” The rupee had touched a record low of 68.95 against the US dollar in August this year following the Fed’s announcement in May that it would taper bond purchases. The decision was,however,postponed.

The Fed has said that the current exceptionally low target range for the federal funds rate of 0 to 0.25 per cent will be appropriate at least as long as the unemployment rate remains above 6.5 per cent.

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