Be ready for US tapering, Chidambaram tells regulators

Finance Minister P Chidambaram has asked financial sector regulators to take concrete measures to avoid any adverse impact of the US stimulus tapering, saying it is likely to happen sooner or later.

Addressing the eighth meeting of the Financial Stability and Development Council (FSDC) in New Delhi on Thursday, Chidambaram said the "opportunity available due to the postponement of the reversal of the monetary policies in advanced economies should be utilised to further address the macroeconomic imbalances".

The FSDC members include heads of regulatory bodies like Reserve Bank of India, Securities and Exchange Board of India and Insurance Regulatory and Development Authority.

The US Federal Reserve in September surprised the markets by deciding to continue with monthly $85 billion bond-buying programme, known as Quantitative Easing (QE), after nearly three months of speculation that had battered the Indian as well as other emerging markets currencies and stocks.

During the meeting, Chidambaram emphasised that tapering off of QE in the US is likely to happen sooner or later and, as such, regulators must take all possible concrete measures to avoid any adverse impact on the Indian economy, an official statement released after the meeting said.

Top financial regulators, including RBI Governor Raghuram Rajan, finance secretary RS Gujral, economic affairs secretary Arvind Mayaram, financial services secretary Rajiv Takru, and Sebi Chairman UK Sinha, attended the meeting chaired by the finance minister.

Chidambaram also expressed the confidence that current account deficit (CAD), the difference between outflow and inflow of foreign exchange, will remain within the earlier estimate of $70 billion of 3.7 per cent of the GDP in the current fiscal.

It had touched an all time high of $88.2 billion, or 4.8 per cent, in 2012-13.

According to a statement released by the finance ministry, the FSDC deliberated on the implementation of the recommendations of the Financial Sector Legislative Reforms Commission; impact of tapering off of the QE in the US and preventive measures to be taken, among other things.