India to stay 'vigilant' to ensure financial stability: Government

NEW DELHI (AFP) - India said on Thursday it would take whatever steps necessary to ensure stability in its financial markets after the US Federal Reserve again cut its monetary stimulus.

The finance ministry said the government and the Reserve Bank of India were remaining vigilant to the possible impact on the markets of the US Federal Reserve's decision to taper its stimulus programme.

The ministry said India's economy was prepared for the taper, pointing to India's boosted foreign exchange reserves which stand at US$295 billion (S$377 billion) and robust foreign investment inflows, among other factors.

"However, both the Government and the Reserve Bank of India will continue to remain vigilant and will take whatever steps are necessary to ensure that there is stability in the financial markets," the ministry said in a statement.

"This decision was expected and should not in any way surprise or affect the Indian markets," it said.

The US Federal Reserve stayed the course on tapering its stimulus for the US economy on Wednesday, reducing asset purchases by US$10 billion for the second month in a row.

The Fed said the US economy was growing firmly enough to further trim the stimulus, which will fall to $65 billion a month from February, spelling a steady tightening of global financial conditions.

The decision could exacerbate fears of a capital flight away from emerging markets including India as dealers look for safer investments.

Join ST's Telegram channel and get the latest breaking news delivered to you.