Tapering process improbable to affect Indian economy much as essentials are strong: CEA K Subramanian

Tapering process improbable to affect Indian economy much as essentials are strong: CEA K Subramanian

Chief Economic Adviser K V Subramanian on Wednesday said the effect of ‘taper tantrum’ or withdrawal of financial stimulus by the US Federal Reserve on India may not be greatly given the strong basics of the nation’s economy.

Numerous economists have expressed worry that developing markets can’t bear the cost of a rehash of the ‘taper tantrum’ market disturbance that happened in 2013.

Essentials of the economy are vastly improved now contrasted with what it was during the worldwide financial emergency, he said at the thirteenth lead Annual International G20 Conference coordinated by ICRIER.

“So, I anticipate that while there may be some short term impact possibly but overall I don’t think that the tapering process will affect the Indian economy that much,” he said.

Taper tantrum phenomenon refers to the circumstance in 2013 when developing markets saw capital surges and spike in swelling after the US Federal Reserve began to put brakes on its quantitative facilitating program.

Expressing optimism on the disinvestment front, Subramanian said, for the current year will be totally different from the previous years.

The government failed to meet its disinvestment target in the last three years, bringing up issue over the hopeful target of Rs 1.75 lakh crore assessed for the current financial. So far this financial year, Rs 9,110 crore has been wiped up through minority stake deals in PSUs and offer of SUUTI stake in Axis Bank.

Air India divestment will occur and gauges on privatization of two public sector banks are probably going to be reported soon, Subramanian said.

Discussing the health of the financial sector, he said the banking sector has become productive and NPAs have gone down contrasted with the pre-COVID circumstance.

“The first line of defence and the second line of defence are very important to withstand the bad loans that may arise due to COVID crisis. So, the banking sector looks to be in good health and that is important because the slowdown even before the pandemic happened primarily because of the financial sector,” he said.

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