Reserve Bank Governor Raghuram Rajan, while announcing the mid-quarter monetary policy review last week, said India needs to build a “bullet-proof national balance sheet” to deal with the fallout on the economy from U.S. Fed’s tapering of stimulus that has been only been postponed not done away with.
The report meanwhile also noted that even the economies with current account surpluses have not been immune to the sell-off.
“Malaysian and Thai bond yields have also risen, albeit less than those in India and Indonesia, because these economies are growing at a decent clip, inflation is low, and they run current account surpluses, which mean they rely less on external funding to finance growth,” it said.
The report studies the performance of Asian markets during previous U.S. tightening cycles in 1994, 1999 and 2004 and after the Fed’s earlier easing programmes in the wake of the 2008 global credit crisis and the resultant recession.
