IDFC Research: India’s External Debt And FX Reserves - Profiling The Silver Lining
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IDFC Research Report
Foreign Institutional Investor (FII) inflows have been returning to Emerging Markets of late and India has been one of the recipients with net monthly inflows to India turning positive since June after strong outflows from March to May.
In line, India has been piling up its foreign exchange reserves as buffer, without which the Indian rupee would have appreciated further.
While further accumulation would depend on the strength of the U.S. dollar (contingent on ongoing fiscal spending by the U.S. government, path of Covid-19 and associated global economic recovery) and foreign inflows, the higher cushion provides stability to Indian rupee and credibility with foreign investors.
In this context, we look at India’s external debt profile, the adequacy of its foreign reserves, how all this has changed in the last 15 years and various scenarios of reserve drawdown.We explore this through a series of charts.
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