India's Economy Resilient Despite Foreign Capital Outflows: S&P Assessment

India's Economy Proves Resilient Amid Global Pressures

India is better equipped to handle the current global financial pressures than the initial data suggest, according to a recent assessment by S&P Global Ratings. The country has a sufficient buffer to absorb a higher current-account deficit resulting from the surge in oil prices, as stated by YeeFarn Phua, director of sovereign and international public finance ratings for Asia.

Despite the Iran-war driven oil shock and record outflows from local shares, which have pushed the rupee to fresh lows, the rating firm's comments reinforce confidence in India's macroeconomic stability. This assessment comes after S&P upgraded the country's credit rating to BBB, from BBB- in August, with a stable outlook.

Concerns over the net outflows of foreign business investments are "a bit overplayed," according to Phua, as these mostly reflect repatriation of profits. Gross inflows remain strong, and the important story is that the economy is fundamentally sound, with plenty of investment opportunities.

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The nation's current account deficit has narrowed in recent years, but volatile crude oil prices are threatening to derail the progress. Foreign fund outflows have added to the pressure, with both stocks and the rupee trailing regional peers.

India received net foreign direct investments worth $4.6 billion in February, after six straight months of outflows, according to the latest data. To help cushion the impact of the Iran war on the economy, India is considering emergency steps to shore up foreign-exchange reserves, including hiking fuel prices and curbing non-essential imports like gold and electronic goods.