 "Vigilant on taper, will take appropriate steps, says FinMin")
After stock markets fell in early trade on Thursday, following the US Federal Reserve’s decision to taper its quantitative easing programme, the finance ministry said it was vigilant over the Fed’s move and would, with the Reserve Bank of India (RBI), take appropriate steps to ensure stability in financial markets.
The ministry assured investors the economy’s fundamentals were strong, adding investors shouldn’t worry about external factors, as India was better prepared to handle the tapering than earlier.
Following the ministry’s assurance, the benchmark Sensex corrected about 300 points (compared to Wednesday’s close) to end at 20,498.25 points, down 0.7 per cent.
Last year, when India faced pressure on the rupee due to capital outflows, RBI Governor Raghuram Rajan had announce special concessional dollar swap windows for deposits by non-resident Indians and foreign currency borrowings by banks. These windows helped garner $34 billion.
The ministry said the government had taken note of the US Federal Reserve’s decision to reduce the purchase of mortgage-backed securities and longer-term treasury securities from $75 billion a month to $65 billion a month. “This decision was expected and should not, in any way, surprise or affect Indian markets. However, it may be noted $65 billion is not a small sum and will continue to infuse a large amount of liquidity into world markets.”
The Federal Reserve hadn’t announced a sequential taper; it had clarified “asset purchases are not on a pre-set course” and it would take “further measured steps at future meetings”, the ministry said. The Fed had also clarified the result of the decision will be “sizeable and still-increasing holdings of longer-term securities”.
The ministry’s statement said the Federal Reserve had “reaffirmed its expectations the current exceptionally low-target range for the federal fund rate of 0-0.25 per cent will be appropriate, at least as long as the unemployment rate remains more than 6.5 per cent”, the statement said.
The ministry said now, India was better prepared to tackle the Fed’s move to scale down its stimulus programme. “We have added to our foreign exchange reserves, which stand at $295 billion. FDI (foreign direct investment) and FII (foreign institutional investment) inflows continue to be robust, liquidity is comfortable, stronger regulations have been put in place in the capital markets, the investment cycle appears to have turned positive, credit demand from key sectors is strong, and WPI (Wholesale Price Index)-inflation has moderated.”
India’s current account deficit, earlier estimated at $70 billion this financial year, was now expected to be below $50 billion, the ministry added.
OTHER CABINET APPROVALS ON THURSDAY
The ministry assured investors the economy’s fundamentals were strong, adding investors shouldn’t worry about external factors, as India was better prepared to handle the tapering than earlier.
Following the ministry’s assurance, the benchmark Sensex corrected about 300 points (compared to Wednesday’s close) to end at 20,498.25 points, down 0.7 per cent.
Last year, when India faced pressure on the rupee due to capital outflows, RBI Governor Raghuram Rajan had announce special concessional dollar swap windows for deposits by non-resident Indians and foreign currency borrowings by banks. These windows helped garner $34 billion.
The ministry said the government had taken note of the US Federal Reserve’s decision to reduce the purchase of mortgage-backed securities and longer-term treasury securities from $75 billion a month to $65 billion a month. “This decision was expected and should not, in any way, surprise or affect Indian markets. However, it may be noted $65 billion is not a small sum and will continue to infuse a large amount of liquidity into world markets.”
The Federal Reserve hadn’t announced a sequential taper; it had clarified “asset purchases are not on a pre-set course” and it would take “further measured steps at future meetings”, the ministry said. The Fed had also clarified the result of the decision will be “sizeable and still-increasing holdings of longer-term securities”.
The ministry’s statement said the Federal Reserve had “reaffirmed its expectations the current exceptionally low-target range for the federal fund rate of 0-0.25 per cent will be appropriate, at least as long as the unemployment rate remains more than 6.5 per cent”, the statement said.
The ministry said now, India was better prepared to tackle the Fed’s move to scale down its stimulus programme. “We have added to our foreign exchange reserves, which stand at $295 billion. FDI (foreign direct investment) and FII (foreign institutional investment) inflows continue to be robust, liquidity is comfortable, stronger regulations have been put in place in the capital markets, the investment cycle appears to have turned positive, credit demand from key sectors is strong, and WPI (Wholesale Price Index)-inflation has moderated.”
India’s current account deficit, earlier estimated at $70 billion this financial year, was now expected to be below $50 billion, the ministry added.
OTHER CABINET APPROVALS ON THURSDAY
- Second phase of Bangalore Metro Rail; Centre and state 50:50 venture to execute Rs 26,405.14-cr project
- Changes in central list of Other Backwards Castes to ensure reservation benefits to about 60 castes and communities in 13 states
- Changes to protect people suffering from mental illness
- Telecommunications Consultants Ltd to fill technical posts in Department of Telecommunications and ministries by deputation of group-A officers
- Bill to give wakf properties status of public premises & make unauthorised occupation of the land a criminal offence