India reassures Davos on impact of US DAVOS, Switzerland - India's finance minister
January 22, 2014 00:00
Wednesday told delegates at the World Economic Forum at Davos his country had taken steps to protect against the impact of US monetary policy that many fear will cripple emerging market economies.
Speaking at the opening session of the annual gathering of the global elite, P. Chidambaram said his country's economy was due to grow by six per cent in the financial year 2014 to 2015 and would approach "step-by-step" its potential growth rate of eight per cent.
Chidambaram acknowledged he was "concerned" in May when the US central bank, the Federal Reserve, suggested it would gradually wind down -- or taper -- its $85 billion (63 billion euros) a month stimulus package.
This sparked instability in emerging markets, as much of the cash created by the Fed was parked there and investors worried this would be quickly withdrawn when the liquidity taps were turned off.
Developing countries saw huge inflows of capital when the US started the scheme in September 2012.
India, with its weak public finances and growth at a decade-low of five per cent, was badly hit and the rupee slid to a record low in August.
But the minister said: "Now I think we have done a lot of preparatory work. There will be some consequences in developing and emerging economies but I think we are better prepared for the taper than when we were surprised in May."