Kamal Ghorui
Amid the ongoing Middle East conflict, a recent report by Moody’s Ratings says that recent global shocks have shown India’s resilience among emerging economies to withstand pressures. The report credits the resilience to timely policy measures and the buildup of robust buffers.“India and Thailand are the sovereigns better placed to manage future global shocks. In both cases, the key policy choices that support stability were made well before the recent stress period,” Moody’s says.In its latest study on emerging-market sovereigns, the agency notes that India has ranked among the more resilient economies since 2020, based on multiple indicators such as sovereign bond spreads, domestic yield movements, and exchange-rate stability.The report highlights the following points of strength:Monetary policy frameworks are clear and predictable, inflation expectations are better anchored, and exchange rates are allowed to adjust when needed. This reduces the risk that currency moves turn into persistent inflation or force abrupt policy shifts.
Both countries should also enter future periods of stress with strong and accessible buffers. India’s reliance on domestic funding is balanced by deep local markets and sizeable reserves, the report says.However it notes that India’s relatively high debt burden and weak fiscal balance limit the amount of space available to respond to successive shocks, while Thailand’s rising debt burden risks reducing resilience over time.The report points out that India has consistently demonstrated notable strength during periods of global volatility. Movements in credit spreads have been limited and short-lived, currency depreciation has remained controlled, and fluctuations in local bond yields have been orderly. These factors have helped the country retain uninterrupted access to financial markets even during turbulent phases.
It underscores the role of India’s sizeable foreign-exchange reserves, which have helped stabilise the currency and maintain investor confidence during episodes of global stress, setting it apart from more vulnerable peers.Another key factor has been the presence of a transparent and consistent monetary policy framework. The adoption of inflation targeting well before recent global disruptions has ensured that inflation expectations remain anchored, thereby improving the economy’s ability to absorb external shocks.When compared with relatively more fragile economies such as Türkiye, Argentina and Nigeria, India has largely managed shocks through adjustments in prices rather than prolonged financing stress. This has been supported by deeper domestic financial markets and stronger policy credibility.
