Govt says India well prepared to deal with US Fed rate hike

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Published: September 17, 2015 10:26:01 PM

Ahead of US Federal Reserve's impending interest rate hike, the government today expressed confidence of weathering its impact with "multiple layers of defence" and RBI's preparedness to deal with the situation.

Ahead of US Federal Reserve’s impending interest rate hike, the government today expressed confidence of weathering its impact with “multiple layers of defence” and RBI’s preparedness to deal with the situation.

Markets have been watching if the Fed goes ahead with the first increase in interest rates in nine years and its impact on emerging markets.

“In a situation where there is turmoil almost by the day as far as global markets are concerned, we are trying to make the fundamentals of our own economy strong so that our ability to resist these changes can substantially improve,” Finance Minister Arun Jaitley said at an event here.

The government, he said, will push ahead with its reforms agenda, resolve pending tax disputes and make fundamentals of the economy sound so that it can withstand the global turmoil.

Minister of State for Finance Jayant Sinha said the goal of policymakers in India is to strengthen economy to ensure that asset and financial markets move in an orderly, smooth and predictable manner.

“Whether it is the Fed raising rates or other macro events, the best way to deal is to build multiple layers of defence, which we think we have now put in place,” Sinha told reporters here.

The US Federal Reserve will today decide on its interest rates, which have been kept near zero since 2009. It is widely anticipated that the US would raise interest rates as employment data has improved.

“(RBI) Governor (Raghuram) Rajan is fully seized of all the matter… RBI is very well prepared for whatever mightcome,” Sinha said when asked if RBI is prepared to deal with the rate action of the US Fed.

He said India can handle “quite well” many macro events, including turbulence in the global financial markets.

“Because we have built those layers of defence, whether it is the fundamentals of our economy, whether it is our foreign exchange reserves, whether it is our ability to access various markets, we can deal with those types of macro events,” Sinha added.

He, however, outlined the need to build resilience to deal with other types of macro events such as conflict situation which might arise in some parts of the world or some major catastrophic event.

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