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There should be no undue concern over external factors and the Indian economy is better prepared for the consequences, if any, of the taper, the Indian Finance Ministry said on Thursday morning.
“We have added to our foreign exchange reserves which stand at $295 billion. FDI and FII inflows continue to be robust, liquidity is comfortable, stronger regulations have been put in place in the capital markets, the investment cycle appears to have turned positive, credit demand from key sectors is strong, and WPI inflation has moderated,” a Ministry statement said.
India ranked 16th among the top 20 global economies receiving the maximum foreign direct investment in 2013, said a new UN report. FDI inflows into India grew 17 per cent to $28 billion in 2013 despite unexpected capital outflows in the middle of the year, according to the report.
The US Federal Reserve announced a $10bn reduction in its monthly bond purchases from $75bn to $65bn in the second straight month of tapering its stimulus program.
$65 billion is not a small sum and will continue to infuse a large amount of liquidity into the world markets, the Indian Ministry noted.
The rupee fell sharply by 36 paise to 62.77 against the dollar in early trade today at the Interbank Foreign Exchange market on increased demand for the American currency from importers after the US Federal Reserve decided to scale back its stimulus.
Foreign exchange dealers said the US Fed move put pressure on other currencies overseas.
TBP and Agencies