India well prepared to deal with US rate hike: FinMin

Finance Ministry today said India is well prepared to deal with the impact of the US Federal Reserve interest rate hike and the end of uncertainties will actually help policy makers in emerging economies.

"US Fed rate hike and reference to gradualism are on expected lines. India well prepared," Economic Affairs Secretary Shaktikanta Das tweeted.

The US Federal Reserve last night hiked interest rates by 0.25 per cent. This is the first hike in about a decade, signaling a recovery in the US economy.

"End of uncertainty and accommodative outlook for future will help policy makers in emerging economies," Das said.

He added that the Fed's confidence on recovery is good news for India's exports, especially for the IT sector.

Meanwhile, the rupee today opened 13 paise higher at 66.60 against the US dollar.

Besides, the 30-share BSE Sensex rose 131.43 points at 25,625.80 in opening trade.

Das said there are unlikely to be any capital outflows because of the Fed rate hike.
"We have to keep in mind the fact that India's import bill is substantially lower, of course, we are benefiting out of substantially low crude prices.

"So, therefore, one would not expect substantial outflows" he said, adding that this development is something for which emerging markets were well prepared.
There is an overall macro economic stability and CAD and fiscal deficit are also under control, Das said.

"This year the government is committed to maintain 3.9 per cent fiscal deficit notwithstanding additional expenditure which has been taken as a part of the supplementary demands, presented in Parliament" he said.

On the impact of Fed rate hike on forex market, Das said: "I would not like to make a guess but I think the rupee on the whole will remain stable is the expectation."
He further said that RBI has already made its policy announcement in this regard and he has nothing to add.

The US Fed rate hike is on expected lines, Das said, adding that both the 25 basis points rise and accommodative outlook as spelt out by the central bank are as anticipated.

"They (Fed) are also talking about gradualism, as of now 25 basis points they have announced, about the remaining part of it which they will announce in 2016, it is something that we have to wait and see" he said.

Das expressed hope that the US Fed will be very watchful about the emerging market situation, their job figures and growth numbers.

"What is very good is that Fed chief has also talked about the sustained nature of US revival, which I think is good news for countries like India, which export a lot of it and services to a market like US" he said.

"In any case, India is well prepared with regard to such external vulnerabilities if at all they arise in the future," he added.

"So far as the central bank is concerned and so far as the government is concerned, both of us are working in tandem to deal with the situation" Das said.