India’s Economic Resilience Counters Foreign Outflow Concerns: S&P
Rating agency says foreign investment concerns are overstated as the country remains resilient amid rising crude prices and market volatility.
NEW DELHI: India’s economic resilience remains intact despite rising global financial pressures, with S&P Global Ratings asserting that fears surrounding foreign capital outflows are exaggerated.
The global rating agency said the country possesses adequate financial buffers to manage a wider current account deficit triggered by surging crude oil prices linked to the Iran conflict. YeeFarn Phua, Director for Sovereign and International Public Finance Ratings (Asia) at S&P, said India’s economic fundamentals continue to remain stable even amid external uncertainties.
Her remarks come as the rupee touched fresh lows against the dollar and overseas investors continued pulling money out of domestic equities following the spike in oil prices. However, S&P maintained that India’s overall macroeconomic position remains strong after upgrading the country’s sovereign credit rating from BBB to BBB earlier this year with a stable outlook.
Phua noted that concerns over foreign investment withdrawals largely stem from profit repatriation by companies rather than a decline in investor confidence. She added that gross investment inflows into India continue to remain healthy due to sustained business opportunities and long-term growth prospects.
Although India’s current-account deficit had narrowed in recent years, elevated crude prices are posing fresh risks to external balances. Market volatility has also weighed on the rupee and domestic equities compared with regional peers.
According to the latest official data, India recorded net foreign direct investment inflows of $4.6 billion in February, ending six consecutive months of outflows.
To minimise the economic impact of the ongoing West Asia tensions, the government is reportedly examining contingency measures to strengthen foreign-exchange reserves. These include possible increases in fuel prices and restrictions on non-essential imports such as gold and electronic items.
