Seeking to soothe jittery investors after a massive plunge in stock markets, the Finance Ministry today said the domestic economy has “inherent resilience” to withstand global volatility triggered by China fears and the RBI and government are keeping a close watch.
“Volatility is the new normal in global economy. India has the inherent resilience to deal with emerging challenges. Government is watchful,” Economic Affairs Secretary Shaktikanta Das said in a tweet.
The BSE Sensex fell for the fourth straight day, plunging 555 points today to crack below 25,000 level as investors pulled out money after the devaluation of Chinese currency led to a volatility in global markets.
Das further tweeted, “Yuan volatility: India is well cushioned and continues to be the fastest growing economy. Finmin and RBI keeping close watch.”
“Yuan depreciation, a signal that it will become increasingly market linked. An expected development after it became reserve currency of IMF,” Das said, adding the outlook for Indian economy is positive.
China today lowered the yuan’s central rate against the US dollar by 0.51 per cent to 6.5646, the lowest since March 2011. A lower currency would make Chinese exports cheaper and more competitive in the global markets.
Stock trading in China was suspended for the second time this week today, as the benchmark Shanghai Composite Index slumped 7 per cent.
Das further said that China is moving towards market-linked Yuan pricing and the devaluation was expected for some time.
The devaluation has increased fears of competitive devaluation by exporting countries, which may have implications for the global economy.
It will also have a bearing on the global oil prices as the imports of petroleum products by China will become expensive, thereby denting demand. Low prices fell to an about 12-year low of USD 32.16 per bbl in global markets.