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Business News/ Opinion / Quick Edit/  Growth comfort
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Growth comfort

With foreign exchange reserves at record levels of over $633 billion, the economy is well placed to withstand a capital-outflow shock that a reversal of easy money policies in the West could deliver

Photo: BloombergPremium
Photo: Bloomberg

Standard & Poor’s on Wednesday projected India to sustain high-pace economic growth, helping South Asia’s economy expand 9.5% in 2021-22 and 7% in 2022-23. While this year’s fast growth rate would be on a base of last year’s sharp covid contraction, and would barely be able to regain 2019-20’s output size, the forecast of a 7% clip next fiscal year stands out. If this scenario materializes, it would be a more robust recovery than many economic analysts fear.

Another positive is India’s improving external position. With foreign exchange reserves at record levels of over $633 billion, the economy is well placed to withstand a capital-outflow shock that a reversal of easy money policies in the West could deliver. A big backup vault is among the factors that explain S&P’s stable outlook on India’s BBB-minus sovereign debt rating. This is the lowest investment grade, and any drop could keep some investment flows away from India. Our weak fiscal health, high debt levels and inflation uncertainty present challenges. And then, there’s the pandemic, too. Fitch and Moody’s have also assigned India the lowest investment grade, but with a negative outlook. We can’t afford to slip.

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Published: 08 Sep 2021, 09:58 PM IST
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