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US tapering: ‘India can handle effects’

Publication Date : 20-12-2013


Union Finance Minister, P Chidambaram has expressed confidence that India can easily handle the effects of the US tapering down its stimulus programme.

In a clear bid to dispel misgivings in the industry and stock markets, Chidambaram asserted yesterday that the country is better prepared to deal with the situation arising out of a cut in US bond purchases, adding that markets have already factored in the impact of such a move.

 “The 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,” he said in a statement.

 After a meeting with Reserve Bank Governor Raghuram Rajan in the morning about the impact of US tapering, the Finance Minister said “we are better prepared than in May 2013 to deal with consequences, if any, of the US Federal Reserve’s decisions”.

 The US Federal Reserve on Wednesday night announced that it would reduce the monthly bond purchases to US$75 billion from the existing level of US$85 billion from January.

 “This is a mild reduction and the US Federal Reserve has not announced any sequential reduction,” Chidambaram said.

The US Federal Reserve, the Finance Minister said, will “continue its purchases of treasury and agency mortgaged-backed securities and employ its other policy tools as appropriate, until the outlook for the labour market has improved substantially in the context of price stability”.

 The US Federal Reserve had first in May announced it will taper bond purchases, sending the markets the world over in a tizzy. However, later it postponed the decision.



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