With expectations growing that US Fed may raise interest rates later this week, India’s economic affairs secretary Shaktikanta Das on Monday said the country is well prepared to deal with any eventuality.
“Today, there is emerging view that job numbers in US look better. How much increase (in interest rate) they (Fed) would do we do not know, but we will be able to deal with it,” Shaktikanta said at an event.
Pointing to the country’s sound macro economic indicators such as low inflation as well as current account deficit, Shaktikanta said India’s economy might grow 7.5-8% in the current fiscal year while the world economy was going through uncertainties.
Continued worries on a slowing Chinese economy and possible interest rate hike by Fed has created bouts of volatility in emerging market economies and their currencies. The US Fed is scheduled to review its monetary policy on September 17.
India fears tightening of interest rates by US Fed could lead to outflow of capital from the country, further pulling down the value of rupee against the US Dollar. While depreciation of rupee could offer little help to exports as demand is low in major global markets, it might inflate imports and hurt companies with foreign currency loans that they have not hedged as yet.
Highlights of economic affairs secretary’s comments:
-Expect economy to grow over 7.5% in FY16
-Government stepping up public capital expenditure
-Global volatility impacting rupee, but not as much as it did in 2013
-Low crude, commodity prices positive for India
-Government will achieve overall tax target this fiscal despite pressure on direct taxes
-Lower corporate profits impacting direct tax collection
-First tranche of Iran crude oil payments arrears will begin this month