Enough ammunitions to deal with tapering of Fed stimulus: Mayaram

Says we have close to $270 billion of foreign reserves with the RBI, close to $40 billion additional inflow of capital this fiscal year, a $50 billion swap arrangement with Japan

There is no room to be fearful of rupee taking a tanking again when US Federal Reserve decides on tapering of its stimulus programme as the government has enough ammunitions in its hand to deal with the situation, a top finance ministry official said today.

"I do believe when tapering happens then there will be outflow of capital but the fact also remains that we have enough ammunitions in our hand...And therefore there is no room to be fearful of rupee taking a tanking,"Department of Economic Affairs Secretary (DEA) Arvind Mayaram said at an event here.

Elaborating further, Mayaram said,"We have close to $270 billion of foreign reserves with the RBI, close to $40 billion additional inflow of capital this fiscal year, a $50 billion swap arrangement with Japan."

He also said a $100 billion contingency fund has been signed by BRICS countries.

The US Federal Reserve last week surprised the markets by saying it will continue with its monthly $85 billion bond buying programme and wait for more evidence of growth recovery before thinking of unwinding the stimulus.

Expectations that the stimulus programme would be tapered had led to fears of capital outflows, causing the rupee to depreciate against the dollar and stocks to fall.

On rupee, Mayaram said the intrinsic value of the rupee is between 58 and 60 against the dollar.

"There is something called intrinsic value of rupee. The intrinsic value of rupee comes from its purchasing power. The intrinsic value of rupee in Real Effective Exchange Rate (REER) term could be somewhere between 58-60," he said.

Mayaram expressed confidence that Foreign Direct Investment (FDI)inflows into India in the current fiscal would be around $36 billion.

"This year in the first quarter, the net FDI flow in the country has been $9 billion, which is 70% higher than FDI inflow in the first quarter of the last fiscal. If that trend continues, then I have no doubt, FDI inflows in the country will be $36 billion," he said.

 Department of Economic Affairs Secretary also said the government will be able to save around $1 billion as bulk diesel demand falls.

 On growth, he said, "We are not satisfied with 5% growth rate. India's potential rate of growth is 8%. In the next two years India will again start growing at 8%."

 Economic growth in India in the April-June quarter of this fiscal slipped to 4.4%, the slowest pace in at least four years.

India's economic growth had fallen to decade's low of 5% in 2012-13 fiscal year.