The government on Thursday said that it will take all measures to ensure stability in financial markets after the US central bank decision to wind down economic stimulus triggered a pullout by investors from emerging markets and affected India also.
The US Federal Reserve decided late Wednesday night that it would buy $65 billion in bonds per month starting next month, $10 billion less than it is doing currently. This triggered a sell-off in emerging markets such as Turkey, Brazil, South Africa, Indonesia and Argentina. However, the flight of capital from Indian market was not as grave.
"Both, the government and the Reserve Bank of India will continue to remain vigilant and will take whatever steps are necessary to ensure that there is stability in the financial markets," the finance ministry said in a statement.
The finance ministry noted that even at the trimmed level of $65 billion a month, the quantum of US Federal Reserve's monthly asset purchase amount was big and would continue to infuse large amount of liquidity into world markets.
Economic Affairs Secretary Arvind Mayaram said, “There is not going to be a sudden contraction of liquidity.” The current account deficit in 2013-14 is expected below $50 billion, the statement said.
“Therefore, there should be no undue concern over external factors," it said.
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