Latest News | India Macroeconomic Fundamental in Good Position to Withstand Tapering: CEA

New Delhi, Aug 31 (PTI) Chief Economic Adviser KV Subramanian on Tuesday said India's macroeconomic fundamentals are strong, and it can withstand the impact of indicative 'taper tantrum' or withdrawal of monetary stimulus by the US central bank.

Many economists have expressed concern that the emerging markets cannot afford a repeat of the 'taper tantrum' market disruption that occurred in 2013.

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Till last week, US Federal Reserve chairman Jerome Powell was non-committal on when the taper would begin. However, he had said the Fed could do so later this year if the US job recovery continues.

The central bank's process of tapering its asset purchases of about USD 120 billion per month would signal a gear-shift in Fed ultra-easy-money policy and possibly shake up global capital flows.

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Drawing confidence from strong macroeconomic fundamentals, Subramanian said taper tantrum should not be of concern to India.

"The fact that our macroeconomic fundamentals, whether it is inflation, whether it's a current account deficit, whether it's our forex reserves, and all the other metrics...they clearly indicate that our macroeconomic fundamentals are very very strong.

“I absolutely do not think that they should be that much of a concern as I had mentioned this is because of the several reform measures and the supply-side measures that have been taken," he said.

These measures have enabled to keep inflation from running away into double digits, as it happened post-global financial crisis, despite the fact that there was no lockdown or restrictions that were imposed then, he said.

"At the same time, an investment-driven growth has been enabled significantly through the policy push - both the Capex and the reforms that have been announced over the year and a half. So, I do foresee that whenever the tapering happens, I think India will be in a very good position to withstand that," he said.

He said growth during the current fiscal would be higher than the pre-pandemic level, and the GDP growth should be in line with the projection made in the Economic Survey.

India is poised for stronger growth on the back of structural reforms, Capex push by the government, clean up in the financial sector and rapid inoculation that will help revive the contact-intensive service sectors, he said.

The banking sector has now developed a cushion to withstand impending bad loans, he said, adding net profits of public sector banks (PSBs) increased to Rs 31,816 crore in 2020-21.

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)