New Delhi: Unlike South Korea and Singapore, India is not vulnerable to fallout of the US recession, says a report by the international credit rating agency Standard and Poor’s.
However, the US recession could “lead to a decline in capital inflows and weaker exports particularly of services. This could affect the capital and current account and put pressure on the balance of payment surplus,” said the S&P report ‘Asia Pacific sovereigns brace themselves for headwinds from US’.
In addition to India, China too has been placed in the category of ‘not vulnerable’ countries by the rating agency.
Those which are ‘vulnerable’ to the US recession are Pakistan, Singapore, South Korea, Malaysia, Philippines and Thailand. The countries which fall in the ‘moderately vulnerable’ category include Japan, Australia, Hong Kong, Indonesia and Sri Lanka.
The report further pointed out that “economies with a relatively small export sector and a large domestic market, such as India ..., are going to be much less vulnerable to a US recession-induced fall in export demand”.
India’s large domestic market, the report said is also among the factors which will reduce the risk of an economic slowdown due to external factors.
While commenting on the credit implications of the US slowdown on India, it however said that a widening current account deficit could put some pressure on the country’s external position but “would not be expected to significantly harm its credit fundamentals”.
Among other growing Asian economies, China, Japan and Korea, according to the report would also have no potential credit implication.
Although Pakistan and Sri Lanka were said to have a possible negative outlook or a downgrade of credit implication due to the US recession.