Finance Minister P Chidambaram today asserted that India is better prepared to deal with the impact of US stimulus withdrawal and said its consequences will not be large and more steps will be taken, if needed.
"We are better prepared than in May 2013 to deal with consequences, if any, of the US Fed Reserve's decisions.... I think the consequence should not be large. Even if there are some consequences then I think we are better prepared," he said.
The Minister was reacting to the US Federal Reserve's announcement yesterday on reduction of monthly bond purchase to USD 75 billion from USD 85 billion from January.
"If any other policy actions are required, we will respond. At the moment all that we have announced (are having) an impact," Chidambaram said.
India's' stock and currency markets reacted negatively to the US Fed's announcement, with benchmark index BSE Sensex falling by about 151 points and rupee slipping to 62.25 a dollar intra-day, down by 16 paisa from its previous close.
Chidambaram said the government is of the view that markets have already factored in the US Federal Reserve's decisions and "therefore is not likely to be surprised by these moderate changes".
The Finance Minister spoke to Reserve Bank Governor Raghuram Rajan in the morning and discussed about the likely impact of US tapering on India.
Chidambaram also said India has increased the quantum of bilateral currency swap arrangement with Japan from USD 15 billion to USD 50 billion, a move which will help stabilise rupee exchange rate.
"We have to wait to see what they (US) do with the interest rates. Fed says interest rates will continue to be kept low," he said.
