Government sees little negative impact of US Fed hike

‘We are relatively well-cushioned’

India is better placed to deal with the US Fed rate hike due to improvement in external balances and less dependence on commodity exports: this is the dominant view of the government, most independent analysts and Indian industry.

Chief economic adviser Arvind Subramanian said on Thursday that the impact of the US interest rate hike should be minimal in India. “I think we are relatively well-cushioned. Volatility in Indian markets should be quite minimal,” said Mr Subramanian.

The US Federal Reserve on Wednesday raised interest rates by one quarter percentage, the first hike in seven years. “The impact will happen depending upon what it signals about the future rate hikes. I think that is still a little bit open. Let’s wait,” Mr Subramanian said.

The finance ministry said Indian stocks and forex markets have reacted well after the US Fed’s decision. “Both the benchmark market indices actually rose in early trade today and continue to trade in the green. The rupee is stable in the 66-67/$ range,” said the finance ministry. It said this underlines the strong macroeconomic fundamentals of the Indian economy and the efforts made to achieve macro stability over the last one and a half years. “India is much better placed today in terms of real GDP growth, lower inf-lation, lower current acco-unt deficit and on-going fiscal consolidation. We hope to sustain economic refor-ms going forward into the future,” said the ministry.