India better prepared now for US tapering: Finance Minister

DAVOS, Switzerland (REUTERS) - Developing economies will feel some impact from the United States Federal Reserve's winding down of its stimulus but India is better prepared than last year, Finance Minister Palaniappan Chidambaram said.

First signals from the Fed last May that it would begin to scale back - or "taper" - its extraordinary economic stimulus measures prompted many investors to pull funds out of emerging markets seen as risky, hitting asset values.

"We were concerned in May. But now I think we have done a lot of preparatory work," Mr Chidambaram told reporters on the sidelines of the Davos economic forum on Wednesday.

"There will be some consequences in developing and emerging economies but I think we are better prepared for the taper than when we were surprised in May."

Explaining what India has done to prepare for the tapering, he said: "Fiscal consolidation has taken place. There's more FDI flowing into India, we've added to our reserves. The rupee is stable, and a number other of measures have been taken to bring stability in the capital market." Mr Chidambaram added that the Indian economy had stabilised.

"I think it is accepted all around that the Indian economy has stabilised in the last 12 months or so and that we are poised to grow back step by step to the 8 per cent potential growth rate," he said.

"(For the) financial year 2013/14 that will end in March, we will be only about 5 per cent (growth). But (for the) financial year 2014/15, which is nine months of calendar 2014, we will cross 6 per cent."

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