FM downplays risks from Evergrande, Fed moves

October 07, 2021 12:00 am | Updated 06:28 am IST - NEW DELHI

‘Govt., RBI watching for taper tantrum’

Nirmala Sitharaman

Nirmala Sitharaman

Finance Minister Nirmala Sitharaman downplayed fears of global contagion from China’s Evergrande crisis and said the central bank and the government were keeping a close watch to cope with any ‘taper tantrum’ risks arising from the U.S. Federal Reserve’s likely shift in policy stance.

Without naming China, she also red-flagged a growing trend of smaller countries being driven into a debt trap that threatened their sovereignty.

“I am sure there will be, not specific to one country, but there will be this larger issue of debt sustainability, sovereignty and how smaller countries are facing a very trying and challenging situation when these two extremes are forced upon them,” she said at the opening session at ICRIER’s annual G20 conference.

Stressing that India and the world had learnt lessons from the 2008 global financial crisis, Ms. Sitharaman said she wasn’t sure if the Evergrande crisis would figure in the upcoming G20 summit. “But without specifically referring to the G20 or any one particular country, it can be seen that globally, the sense of worry may be there but the fear that this is certainly going to hit us, is not there,” she said in reply to a query from NITI Aayog vice chairperson Rajiv Kumar on China’s real estate sector’s challenges spilling over to global markets.

‘Debt trap’

“Specifically, not Evergrande, but debt sustainability is an issue. Which I am sure every global forum will have to address and talk about; particularly, debts which are being given, which also bring the sovereignty of a nation into the picture and threatens that; then it is a matter of serious concern and many of the countries are sitting up to say: What is happening around in the world?” Ms. Sitharaman remarked.

Emphasising that India had learnt its lessons from the way it handled the last taper tantrum which made it one of the ‘fragile five’ economies, she said: “Together with the Reserve Bank of India, we are definitely keeping a watch.”

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