Moody's Finds India Better Placed to Withstand Future Global Economic Shocks

India Emerges as Resilient Large Emerging Market Economy

India has emerged as one of the most resilient large emerging market economies since 2020, according to a report by Moody's Ratings. The country's strong foreign exchange reserves, stable policy frameworks, and deep domestic capital markets have supported its resilience.

In its latest report on emerging markets, Moody's noted that India is well-positioned to manage future external volatility. The country's monetary policy framework remains clear and predictable, inflation expectations are well anchored, and exchange rates are allowed to adjust when required. This stability has helped India withstand global shocks, including the outbreak of the COVID-19 pandemic in 2020, the global inflation shock and the US Federal Reserve's aggressive tightening cycle in 2022, regional banking turmoil in the US in 2023, and renewed global tariff tensions in 2025.

Moody's compared India's performance with other large emerging market economies, including Indonesia, Mexico, Malaysia, Thailand, Brazil, South Africa, Nigeria, Turkey, and Argentina. The report found that India's reliance on domestic funding is balanced by deep local markets and sizeable reserves. However, India's relatively high debt burden and weak fiscal balance limit the amount of space available to respond to successive shocks.

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The report noted that India would enter any future period of global stress with strong and accessible buffers, helping preserve investor confidence even during periods of heightened uncertainty. This is because India has managed to absorb a series of global disruptions over the past five years without facing a sharp rise in funding costs or losing access to capital markets, reflecting stronger policy frameworks and improved macroeconomic resilience.

Moody's study covered multiple global stress events since 2020, including the COVID-19 pandemic, the global inflation shock, regional banking turmoil, and renewed global tariff tensions. The report concluded that relatively accommodative external market conditions in the wake of recent shocks helped emerging markets absorb successive external shocks since 2020.