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RBI Governor Raghuram Rajan has said there would be some volatility in emerging markets once the US Federal Reserve decided to raise interest rates, but India is well prepared to deal with market volatility. "My hope is that after the initial volatility there will be differentiation, and the financial investors would try to see where there is some macro-stability," Rajan said in Washington.
He was attending the International Monetary Fund (IMF) and World Bank fall meetings.
It is expected that the Fed Reserve may raise interest rates from next year as the US economy is showing signs of improvement.
He also said interest rate hike might not have much impact on India as "we have got plenty of reserves relative to where we were last year... We have got inflation coming down in a substantial way".
If Fed hikes the rates there could be outward flow of capital from India which may in turn put pressure on India's forex reserves and subsequently on forex.
Falling for the fourth week in a row, India's foreign exchange reserves went down by $1.415 billion to $314.181 billion in the week to September 26 on account of a hefty drop in non-US currency assets.
Earlier Rajan had described the fall in reserves as dip in valuation with appreciation of dollar against other currencies.
"In the recent weeks the dollar has been appreciating against the other currencies. Therefore, when we look at our reserves in dollar terms, they have been coming down," Rajan had said.
Rajan had hoped that inflation will moderate to acceptable level of 6 per cent by January 2016 and maintained that the GDP growth in the current fiscal will be 5.5 per cent, same as projected earlier.
