Chidambaram wants regulators to take preventive steps for US taper: report

Finance Minister P Chidambaram today asked financial sector regulators, including the Reserve bank of India (RBI) and the Securities and Exchange Board of India (Sebi), to take preventive steps to neutralise the impact of US Federal Reserve's monetary stimulus tapering that is likely early next year.

Mr Chidambaram, according to sources, asked regulators at the Financial Stability and Development Council (FSDC) meeting to work out preventive measures. The FSDC members include heads of regulatory bodies like RBI, Sebi and IRDA (Insurance Regulatory and Development Authority).

The meeting was attended by RBI Governor Raghuram Rajan, Sebi chief U K Sinha, among others.

Former Reserve Bank of India (RBI) head D Subbarao was a special invitee. The Forward Markets  Commission (FMC) was included in the FSDC and its chairman Ramesh Abhishek was also present.

Mr Chidambaram, sources said, "asked different regulators to work on preventive measures to counter the impact of tapering which is likely to take place early next year".

Tapering, which refers to gradual withdrawal of the $85 billion a month bond purchase programme, was deferred by the US Federal Reserve in September.

The tapering, whenever it takes place, will have a bearing on global economy. It will impact fund flows to emerging economies, including India.

Mr Chidambaram also expressed the confidence that current account deficit (CAD), the difference between outflow and inflow of foreign exchange, will remain within the earlier estimate of $70 billion of 3.7 per cent of the GDP in the current fiscal.

It had touched an all-time high of $88.2 billion, or 4.8 per cent, in 2012-13.