Even as the US Federal Reserve’s decision to maintain status quo on stimulus cheered the Indian stock market and rupee, the Finance Ministry feels that India would do better to focus on its own structural reforms rather than over-emphasise the US central bank’s decisions.
However, it does feel that the US action will have a bearing on the monetary policy review to be announced on Friday.
“It’s business as usual for us, as far as we are concerned,” the Economic Affairs Secretary, Arvind Mayaram, told reporters while reacting to the Fed’s move.
In a late development on Wednesday, the Federal Open Market Committee (FOMC) decided to keep its monthly asset purchase programme unchanged at $85 billion a month, waiting for more evidence that the improvement in US economy will be sustained.
Mayaram said, “We will have to continue with the structural reforms, which the Government has been carrying out. I think we will need to continue to deepen our own reform process so that we continue to strengthen the economy.”
Only last month, Finance Minister P. Chidambaram spelt out a 10-point action plan to bring the economy back on the high-growth trajectory. The plan includes encouraging manufacturing and exports, controlling twin deficits (fiscal and current account), reviving the investment cycle, and resolving the impasse in coal and iron ore mining.
Mayaram believes that the steps taken will continue to show signs of growth. This, in turn, will strengthen the rupee and markets.
“We should not put over emphasis on the decisions of the Fed,” he said. Though he said that some clarity from the Fed would have given more relief. “I think as far as we are concerned, we would have thought it would have been good if there was some kind of policy guidance so that there was certainty as to how the tapering will happen,” he said.
Taking this argument forward, Financial Services Secretary Rajiv Takru said the markets had given sufficient indication about how they perceived the move.
“We have to plan in our interests. And we were ready for any kind of a decision which was taken. So, we are happy, I think we were ready for both,” he added.
When asked whether there was more headroom for the RBI to cut rates, he said, “Looking at every event in isolation is not fair. This (Fed move) would be one of the factors which the RBI will now take into account. So, now this will be considered, and we will know soon enough.”