Global rating agency Moody’s Investors Service on Monday said that the market concerns over India’s economic exposure to external risks have risen over the past seven months.
A poll conducted by Moody’s and its Indian affiliate, ICRA, in Mumbai in mid-January 2016 showed that an increasing number of market participants now view external shocks as a major challenge facing India’s economy.
“The market participants we surveyed are increasingly concerned about the potential spillover of external risks such as interest rate tightening in the US and China’s ongoing slowdown on India’s growth story,” said Rahul Ghosh, a Moody’s vice-president and senior research analyst.
Of the market participants who responded to Moody’s and ICRA’s question on the greatest risk to India’s macroeconomic growth over the next 12-18 months, 35 per cent saw external shocks as the greatest challenge facing India’s economy, up from just 10 per cent for the previous Moody’s and ICRA poll conducted in May 2015.
“However, the result is more likely a reflection of the broad-based spike in global risk aversion, rather than India’s relative vulnerabilities,” added Mr Ghosh. “Investors see India as much better placed in terms of growth than most of its similarly rated emerging market peers, such as Indonesia, Turkey, Brazil, South Africa and Russia,” he said.
According to the rating agency’s poll, 32 per cent thought the sluggish reform momentum would be the largest threat to India’s GDP growth, down from 47 per cent in May 2015 while 19 per cent of the respondents believe that infrastructure constraints were the most important factor that could derail domestic growth.
