India Well-Positioned To Handle External Pressures, Outflow Concerns Overstated: S&P Global

New Delhi, May 13 (KNN) India’s economy remains resilient despite rising global financial uncertainties, with concerns over foreign capital outflows appearing overstated, according to S&P Global Ratings. 

The assessment comes amid heightened volatility triggered by an oil price surge linked to the Iran conflict and record foreign fund outflows that have weakened the rupee.

Strong Buffers Support Stability

S&P noted that India has adequate buffers to absorb a widening current account deficit, particularly in the wake of elevated crude oil prices. 

YeeFarn Phua, Director, Sovereign and International Public Finance Ratings (Asia) at S&P, in an interview with Bloomberg on, stated that the country’s economic fundamentals remain sound, supported by sustained investment opportunities and stable macroeconomic conditions.

This view reinforces confidence following S&P’s recent upgrade of India’s sovereign credit rating to ‘BBB’ from ‘BBB-’, with a stable outlook.

Outflow Concerns ‘Overstated’

The rating agency downplayed concerns around foreign capital outflows, noting that much of the net outflow reflects profit repatriation by investors rather than a structural withdrawal of investments. Gross inflows into the country continue to remain robust, indicating sustained investor interest.

Recent data showed India recorded net foreign direct investment (FDI) inflows of USD 4.6 billion in February, breaking a six-month streak of outflows.

Oil Prices and External Pressures

India’s current account deficit, which had narrowed in recent years, faces renewed pressure from volatile crude oil prices. The situation has been exacerbated by foreign fund outflows, with domestic equities and the rupee underperforming compared to regional peers.

Policy Measures Under Consideration

To mitigate the economic impact of rising oil prices, the government is considering emergency measures to strengthen foreign-exchange reserves. These may include increasing fuel prices and restricting non-essential imports such as gold and electronic goods.

Overall, S&P’s assessment highlights India’s capacity to navigate external shocks, even as global uncertainties continue to pose risks.

(KNN Bureau)