The incessant dollar outflows from the Indian bond market have brought back memories from earlier episodes—one in 2013 and another in 2008. The adjoining chart shows that the outflows from equity and bonds combined in the first five months of the current calendar year has surpassed that of 2008, a year that marked the global financial crisis.

What does this signify? First, India’s vulnerability to global events has increased given greater integration of trade, banking and other channels.

A decade ago, India was on a high growth trajectory, and the local currency was relatively stronger; although inflation was a big worry then. The dollar exodus of 2008 from India—largely in equities—was purely a result of the global financial crisis.

Right now, the Indian economy is in a recovery mode, and looks fragile, given the hangover of bad loans on banks and the tepid investment demand. This adds to the vulnerability from global factors, and hence foreign investors want nothing to do with Indian assets.

The fact that the US Federal Reserve is on a tightening mode reduces the appeal of Indian bonds even more. Hence, it should not come as a surprise that foreign investors have pulled out nearly $5 billion from the markets.