The Financial and Development Council (FSDC) met on Tuesday to assess the impact of a fresh round of bond-buying tapering by the US Federal Reserve.
The council made an assessment of the financial stability of Indian markets, including preparedness for impact of further US tapering, liquidity crunch and re-pricing of risk, the finance ministry said in a statement.
?We discussed a broad set of issues facing the economy and decided to move forward on some of those. As and when precise decisions are determined, we will obviously announce them,? RBI governor Raghuram Rajan told reporters after the meeting.
?We have done a lot to make the economy robust. We are better prepared. I would never say fully prepared for any eventuality. We always have to be vigilant. We are better prepared now certainly than we were six months ago and its because of hard work by the government and the regulators,? Rajan said.
The Fed said on January 29 that it would buy $65 billion in bonds per month starting in February, down from $75 billion previously. While the Indian currency and markets did take a hit, the sell-off was nowhere as bad as in other emerging markets such as Brazil, South Africa, Turkey and Argentina.
It was also nowhere as gloomy as last year. When former Fed chairman Ben Bernanke first spoke of the tapering in June, it caused a massive bleeding of capital from India as well. By August, the rupee had touched a life-time low of 68.85 against the dollar and foreign capital all but fled the country. The main concern now for the country’s policymakers is that Bernanke did not give any specific outlook for future tapers and that Janet Yellen, being new to the job, has also not given a clear indication of her view on the tapering.
When asked about what Yellen might do next, Rajan said, ?Janet Yellen is a very experienced central banker who has spent a lot of time at the Fed. I have full faith that she will do what is appropriate and that she will be a reliable central banker.?
Apart from Rajan and Chidambaram, the two-hour long meeting was also attended by Sebi chairman UK Sinha, FMC chairman Ramesh Abhishek, IRDA chairman TS Vijayan, and secretaries of finance, economic affairs, financial services.
In the meeting, Chidambaram asked regulators to expeditiously introduce a common demat account for all financial assets, a move that is expected to benefit investors.
