100-Word Take | Was the recent market fall worse than the taper tantrum?
For equity markets in emerging markets, the 2018 scare was far worse. The World Bank said $ 24 billion fled these markets during the recent fall compared to $ 5.8 billion moving out during the taper tantrum in 2013, while $ 16.9 billion exited during the Chinese slowdown worries in 2015. The accompanying chart has the details. (See bottom)
For India, the extent of the fall in the Sensex from its highs was much more during the Chinese scare, but that was also the period when we had our spectacular demonetisation experiment. The Indian markets suffered as much during 2013 as in the 2018 fall, but crude oil prices were higher then, so the Indian economy was far more vulnerable.
India needs foreign money to fund its current account deficit, so it’s important that the government sticks to the straight and narrow fiscal path. Macro-economic stability, rather than populist measures or trying to push growth at all costs is needed to weather global volatility, which is pretty much inevitable these days.