Ahead of the likely tapering of quantitative easing by the US Federal Reserve,finance minister P Chidambaram on Thursday asked financial sector regulators to take preventive measures to offset its impact on India.
Regulators must take all possible concrete measures to avoid any adverse impact on the Indian economy, the finance minister is understood to have said at the meeting of the Financial Stability and Development Council.
A decision on tapering or the gradual withdrawal of the $85 billion a month bond purchase programme was deferred by the Fed in September and is now expected to take place early next year.
The move would impact the global economy and could witness fund flows out of emerging economies.
The Indian markets had between June and September this year,reacted sharply to the expectation with a huge outflow by foreign institutional investors and volatility in the rupee which fell by 15.8 per cent reaching a record low of 68.85 against the US dollar.
The opportunity available due to the postponement of the reversal of the monetary policies in advanced economies should be utilised to further address the macroeconomic imbalances, Chidambaram,who heads the committee,told regulators.
The eighth meeting of the FSDC was attended by Reserve Bank of India Governor Raghuram Rajan,Sebi chief UK Sinha,insurance regulator TS Vijayan as well as Forward Markets Commission chairman Ramesh Abhishek along with secretaries of the finance ministry.
Former RBI Governor D Subbarao was a special invitee to the meeting.
Further,in a step towards financial sector reforms,Chidambaram also asked regulators to finalise an action plan for implementing all recommendations of the Financial Sector Legislative Reforms Commission (FSLRC) that do not require legislative action. Other aspects of the report would be looked into after public comments.
But taking up a key suggestion of the FSLRC,the meeting also decided that action should be taken for finalising the roadmap for creation of new institutions such as Resolution Corporation,Financial Sector Appellate Tribunal and Public Debt Management Agency.
The FSDC also discussed the corporate distress redressal mechanism proposed under the new Companies Act and identified the role of regulators to implement these provisions to prevent,as also to take remedial measures on,corporate distress. The meeting was also attended by corporate affairs secretary Naved Masood.