India hits back at German quip on emerging markets
February 21, 2014, 12:09 pm

Manmohan Singh, left, prime minister of India, with Chinese President Xi Jinping [Getty Images]

“There has to be a much greater clarity and much greater cooperation between the Fed and other emerging markets to ensure that tapering is done in a systematic manner so as not to destabilise whatever little stability has been achieved in the global economy,” India’s Economic Affairs Secretary Arvind Mayaram said.

The Indian reaction came hours after German Finance Minister Wolfgang Schaeuble said emerging markets should get their own houses in order before demanding solidarity from other nations.

“In my opinion we must always strive towards an approach of solidarity. Everyone must first of all do their own homework and then countries can demand solidarity from others,” Schaeuble said.

Policy at the US Federal Reserve has been a major factor in the recent exchange rate volatility in emerging-market countries including the BRICS.

China’s yuan currency fell against the US dollar for the third consecutive day on Thursday to 6.11 central parity, coming in at its lowest level in 2014.

On Friday, India’s Economic Affairs Secretary Mayaram said there should be some kind of guidance from the US authorities to make tapering more predictable.

“There must be a certain understanding as to how to go forward and what is the manner in which you will calibrate the withdrawal of the stimulus,” said the Indian official, who is in Sydney to participate in the G20 meeting.

“There must be some benchmark…Should it be USD 10 billion every quarter or USD 20 billion…Without destabilising the economy. Nobody knows how they are going forward. We want that to be a little more calibrated and one that takes others into confidence. Central bankers should be informed as they look into monetary policies. There has to be guidance,” Mayaram said.

The US Fed announced in January that the US economy was strong enough for it to taper its monthly stimulus program from $75 billion to $65 billion.

The Indian government has assured investors the country is better prepared to deal with any impact of tapering. According to the minutes of the US Federal Open Market Committee meeting in January, several participants said there should be “a clear presumption in favour of continuing to reduce the pace of purchases by a total of USD 10 billion at each FOMC meeting”.

India’s Central Bank Governor Raghuram Rajan had last month criticized developed nations for their uncoordinated global policy that has adversely hit emerging economies.

Rajan said emerging countries have been the drivers of growth, pulling the global economy out of the 2008 recession and that developed nations should now play their part.

“Industrial countries have to play a part in restoring that, and they can’t at this point wash their hands off and say we’ll do what we need to and you do the adjustment.”

 TBP and Agencies