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Should India be worried about Fed rate hike? Experts say no

New Delhi :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.

The rate hike by the US Federal
Reserve is in line with global expectations and its impact on India will be “very minimal” due to our strong macroeconomic conditions, Chief Economic Adviser Arvind Subramanian said today.

“This rate hike was widely anticipated, so I think markets should have priced this in and there shouldn’t be much of an impact of this per se (on markets),” he told reporters here.

“As far as India is concerned, we are really well cushioned. Inflation is coming down, fiscal deficit situation is very good, external situation is also robust. So, I think for all these reasons, impact on India would be very minimal,” he added.

Subramanian further said that there should not be much volatility in the Indian market due to this global development.

US Federal Reserve had last night raised the interest rate by 0.25 per cent.

“The impact (rate hike) will happen depending upon what it signals about the future rate hikes. I think that is still a little bit open. Lets wait,” Subramanian said.

It was a reluctant rate hike on part of the Fed as there were voices in the US saying that the economy was not strong enough to take such a step, he added.