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External Sector 111

Evidently, the Indian economy has exhibited greater resilience so far to the current episode
of taper. In the immediate aftermath of the taper tantrum in 2013, India experienced portfolio
outflows aggregating to ₹79,375 crore from capital markets, including ₹19,165 crore from
equity markets and ₹60,210 crore from debt markets during May 23-August 30, 2013. The latest
announcement of reduction in asset purchases on November 3, 2021 by the Fed had relatively muted
impact on portfolio flows. The total portfolio outflows amounted to ₹34,178 crore, comprising
₹29,168 crore from equity markets and ₹5,010 crore from debt markets during the period November-
January 20, 2022.

While acknowledging India’s transformation from being among the Fragile Five countries in the
wake of the earlier episode to the 4th largest forex reserve holder during the current episode, Indian
economy stands guard with an added advantage of plenty of policy room for manoeuvring as the
process of normalisation of monetary policy by systematically important central banks takes hold. 7
Reference
Barry Eichengreen, Poonam Gupta and Rishabh Choudhary (2021): The Taper This Time; NCAER
Working Paper, November.

7 Fragile Five countries (Indonesia, South Africa, Brazil, Turkey and India) were identified to be most at risk when tapering began in 2013.