Market facing onslaught of QE tapering: Roubini

While the street is blaming the Reserve Bank of India's 'regressive measures' which led the rupee to all-time low of 62 against the dollar , one foreign investor is supportive of the measures taken by the central bank to stem rupee volatility.

Arnab Das, Roubini Global Economics believes the Indian currency would have been weaker had the RBI not intervened. According to him, the Indian market is experiencing the carnage due to the fear from the US quantitative easing tapering.

Below is the verbatim transcript of Arnab Das's interview on CNBC-TV18

Q: Are you surprised by the fall in the Indian market considering that India was already a big underperformer and today we have seen a 500 point fall on the Sensex?

A: The issue in particular for India is that the signals from the US recovery and the western recovery generally points to the tightening in combination with a still large current account deficit (CAD) and still unresolved issues no matter what attempts are being made to address those issues.

Changes of personnel for very good people, despite all the very positive signals the Indian government is trying to send those decisions are not going to have a short-term effect on the size of the CAD or on the trajectory of growth in the short-term. India is going to face the onslaught of tapering.

If they are implemented after the election bear fruit, if reforms and other kinds of improvements take place other than the short-term macroeconomic stabilisation policies the government is engaged in and indeed those stabilisation policies reveal that India in a bit of a trap.

It needs to keep liquidity tight. It has joined the slew of countries in emerging markets (EM) that are tightening monetary policy in order to defend their currencies and prevent importing inflation, even credit growth and economic growth  are slowing quite sharply. Although things have improved quite a bit in India and other EM countries and seem to take off after the global financial crisis, the reality on the ground is not as good as people have been led to believe.

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