India's Firewalls Strong, Will Withstand Brexit Jitters: Jaitley
The Indian economy is well prepared to deal with short and medium term consequences of Brexit, says the finance minister
Finance Minister Arun Jaitley said on Friday India is well prepared to deal with short and medium term consequences of Britain exiting the European Union and has solid immediate and medium-term firewalls in form of healthy forex reserves.
Stating that the verdict of the referendum will add to the volatility in the global markets, he said all countries around the world will have to brace themselves for a period of possible turbulence while being watchful about, and alert to, its medium term impacts.
"As regards the Indian economy, we are well prepared to deal with short and medium term consequences of Brexit," he said in a statement.
India, he said, is strongly committed to macroeconomic framework with its focus on maintaining stability.
"Our macroeconomic fundamentals are sound with a very comfortable external position, a rock-solid commitment to fiscal discipline, and declining inflation," he said.
"Our immediate and medium-term firewalls are solid too in the form of a healthy reserve position."
The United Kingdom voted to leave EU by 51.9 per cent, according the final result.
Jaitley, who is in Beijing to attend the first meeting of the Board of Governors of the $100-billion Asian Infrastructure Investment Bank (AIIB), said the government, the Reserve Bank of India (RBI) as well as other regulators are "well prepared, and working closely together, to deal with any short term volatility."
"Our aim will be to smooth this volatility and minimise its impact on the economy in the short term," he said.
He said the government in the medium term will "steadfastly" pursue ambitious reform agenda including early passage of the GST bill that will help realise medium term growth potential of 8-9 per cent.
"As investors look around the world for safe havens in these turbulent times, India stands out both in terms of stability and growth," he said, according to a PTI report.
India, he said, is among the fastest growing major economies in the world today. "Our growth and inflation prospects are further improving in the wake of the good monsoons that are now moving well across India."
Stating that India respects the referendum's verdict, the Minister said, "We are also aware of its significance in the days ahead and also for the medium term."
"As I have often said, in this globalised world volatility and uncertainty are the new norms. This verdict will obviously further contribute to such volatility not least because its full implications for the UK, Europe and the rest of the world are still uncertain."
RBI Governor Raghuram Rajan issued a statement saying India's good economic fundamentals would allow it to overcome any "sharp corrections" in global markets.
"The Indian economy has good fundamentals, low short term external debt, and sizeable foreign reserves," Rajan said in the statement released on the RBI's website.
The comments sought to reassure investors after the NSE share index fell as much as 4.2 per cent, the Market benchmark Sensex took a 1,058-point plunge and the rupee slumped to a nearly four-month low after the Brexit vote.
The rupee was last trading at 68.0450/0575 compared with its 67.25 close.
Before the Brexit vote India had been seen as one of the sturdier emerging markets, with the RBI having accumulated a record $363.2 billion in foreign exchange reserves earlier this month.
'Prepared For All Eventualities'
India has the firepower to withstand Britain's likely exit from the European Union, will accelerate growth programmes to offset its impact, and does not expect its foreign trade to suffer, Economic Affairs Secretary Shaktikanta Das said on Friday.
"India is prepared for all eventualities," he said.
"We are prepared to deal with the situation. And as I said the firepower that we have to deal with the situation will be used judiciously," he said adding the government and RBI had been "working on this fire-wall for the last several months and the fire wall to withstand all the external pressures."
Asked when the government plans to use the firepower to contain fall, he said, "this is only a matter of strategy we cannot add detail to that."
On impact on exports, he said India's trade is not going to be impacted significantly. "The impact would be very marginal."
On foreign exchange rate, Das said the government was in touch with RBI. "The Finance Minister, who is Beijing, is constantly and regularly monitoring the situation and whatever direction Finance Minister has to give, he is giving at regular intervals and frequently."
Asked about fall out of the referendum on FTA with UK, he said, "We will have to take a view on such issues."