Ben Bernanke plans to continue with sustained stimulus program in the forseeable future.

Ben Bernanke had sent shivers down the spine of global markets when he announced plans to taper off the QE program. His underlying reason for that announcement was that the US economy was showing signs of improvement. His announcement was followed by a steep fall in all asset classes as there were fears that the taper off would be followed by a phase of monetary tightening which would lead to higher interest rates in the US. But interestingly that is not what Mr Bernanke wants. At least not right now.

In a statement yesterday, he has stated that the Fed would continue with a more accommodative policy till such time as unemployment rates in the US dip to below 6.5%. In fact he plans to continue with the sustained stimulus program in the foreseeable future. This means that interest rates in the US would be maintained at near zero levels. This makes emerging market assets including that of India's more attractive in comparison as they offer higher rates of returns. But the point is that eventually there would be a taper off of the QE program. It may not happen today and it may not happen tomorrow. But it will happen eventually. If India does not wish to be caught on the wrong foot at that time, it has to take steps to improve its fundamental strengths. So that even when the QE program comes to an end, Indian assets would still be attractive to foreign investors.