India will take whatever steps are necessary to ensure stability in financial markets after the US Federal Reserve continued with its planned reduction in stimulus, Finance Minister P. Chidambaram said on Thursday.
The government and Reserve Bank of India will continue to remain vigilant over the situation, he said.
The finance ministry's statement came after the Fed said it will cut its monthly bond purchases starting in February by $10 billion to $65 billion. (Read the full story here)
"This decision was expected and should not in any way surprise or affect the Indian markets," the ministry said.
Many global investors fear that reduced Fed bond buying will raise US interest rates and cause investors to move money out of emerging markets and into the United States for higher returns.
The BSE Sensex slumped over 200 points today, while the rupee slipped over 0.5 per cent to 62.90 per dollar. (Read the full story here)
The ministry said India's economy is better prepared for Fed taper citing rise in foreign exchange reserves, robust FDI and FII inflows, comfortable liquidity and a moderation in inflation.
"The current account deficit, which was earlier estimated at $70 billion, is now expected to be below $50 billion in 2013-14," the ministry said in a statement.
A record current account deficit was the single biggest factor behind the sharp fall in the rupee last year.
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