Rajan for 'bullet-proof' shield to deal with US Fed tapering

US Federal Reserve on Wednesday decided against tapering its monetary stimulus under which it has been buying assets worth $85 billion every month

Reserve Bank Governor Raghuram Rajan today said India needs to build a "bullet-proof national balance sheet" to deal with the fallout on the economy from US Fed Reserve's tapering of stimulus that has been only been postponed not done away with.

"What we need to do is put our house in order before it (tapering) comes back. The postponement of tapering is only that, a postponement. We must use this time to create a bullet-proof national balance sheet and growth agenda, which creates confidence in citizens and investors alike," he said.

Rajan said this during a press conference post RBI's mid-quarter policy review here.

The US Federal Reserve Wednesday decided against tapering its monetary stimulus under which it has been buying assets worth $85 billion every month.

The decision has a positive impact on Indian stock markets as well as the rupee.

 In view of the Fed's crucial meeting on Wednesday, Rajan had postponed the mid-quarter policy announcement from September 18.

"I do think, short-term, it (tapering) has in a sense postponed some of the concerns. My sense is that the markets were quite prepared for a moderate tapering. And, what this has done is, in a sense, it has again created the possibility of uncertainty down the line," the Governor said.

He stressed the need on improving the economic parameters regardless of what the US does so that "we are better prepared for the tapering whenever it happens".

After a possible indication of tapering by US Fed in May, Indian stocks and rupee had plunged on of large scale capital outflows.

Meanwhile in New Delhi, Planning Commission Deputy Chairman Montek Singh Ahluwalia too said India needs to ready itself to deal with tapering.

"They (US Fed) are going to do it. They are going to do it in a phased manner. We should be ready for this happening over a period of time," said.