According to DBS, India's most external vulnerability indicators have shown improvement.
New Delhi:
The Indian economy is well-prepared, even if not completely immune, for any external risk in case the US Federal Reserve normalises rates in December, says a DBS report.
According to the global financial services major, expectations that the US Fed might normalise rates in December have been rising and the resultant risks of a stronger dollar accompanied by a rise in rates are under watch.
-"While this is a source of concern for most emerging markets, we reckon that the Indian economy is well-prepared even if not completely immune to any resultant volatility,-" the report said.
According to DBS, India's most external vulnerability indicators have shown improvement.
The current account balance is likely to ease below 1 per cent of GDP this year, while the balance of payments is in surplus due to portfolio inflows, along with a stronger pick-up in foreign direct investments, improving the overall funding mix.
Moreover, easing domestic borrowing costs have lowered the appetite for external commercial borrowings, with the April-July 2016's lending down 50 per cent year-on-year.
On non-resident deposits, the report said that the upcoming FCNR maturities are likely to further lower the debt burden.
-"These metrics combined with a smaller current account deficit and on-track fiscal consolidation, lower the economy's vulnerability to external risk,-" DBS said.
