India better prepared to deal with U.S. Federal Reserve tapering: Chidambaram

Finance Minister P. Chidambaram on Thursday said India is better prepared now to deal with the consequences of a mild tapering by the US Federal Reserve than it was earlier this year.

In a statement issued here, Chidambaram said: "Government is of the view that the markets had already factored in the U.S. Federal Reserve's decisions and, therefore, is not likely to be surprised by these moderate changes. Besides, we are better prepared than in May 2013 to deal with the consequences, if any, of the U.S. Federal Reserve's decisions."

Chidambaram further said he has spoken to Reserve Bank of India (RBI) governor Raghuram Rajan on this issue.

"Government has taken note of the statement issued by the US Federal Reserve on the 'taper'. This morning, I spoke to Dr. Raghuram Rajan, Governor, RBI."

"The U.S. Federal Reserve has announced that it will continue to purchase securities at the rate of USD 75 billion per month, as against the earlier level of USD 85 billion per month. This is a mild reduction, and the U.S. Federal Reserve has not announced any sequential reduction," he said.

" The statement also says that the US Federal Reserve will "continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability," he added.

The statement also said that it is the U.S. Federal Reserve's "expectation that the current exceptionally low target range for the federal funds rate of 0 to 1/4 percent will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent.