Moody's Endorses India as Standout Emerging Market Economy

In a recently released report, Moody's said India 'better placed' than most of its emerging market peers to absorb future global shocks, pointing to three pillars that set it apart -- strong foreign exchange reserves, a stable and predictable policy framework, and deep domestic capital markets -- which reduce its dependence on volatile external funding.

Since 2020, emerging markets have been stress-tested repeatedly, it said.

It highlighted the COVID-19 pandemic first, then by the sharpest global inflation surge in decades, followed by aggressive US Federal Reserve rate hikes in 2022, regional banking turmoil in 2023 and renewed tariff pressures in 2025.

Across each of these episodes, Moody's found that India absorbed the turbulence without a sharp rise in funding costs or a loss of access to capital markets, an outcome that eluded several of its peers.

Moreover, the ratings agency noted that India's monetary policy framework has remained clear and consistent, inflation expectations are well anchored and the exchange rate has been allowed to adjust when needed, which is a combination that preserves investor confidence even when external conditions deteriorate.

The report also outlined that India would enter any future period of global stress with buffers that are not just strong, but accessible, a distinction that matters when markets move fast and policy response time is short.

In its own words, deep local markets and sizeable reserves help balance India's reliance on domestic funding, but fiscal space remains a constraint.

The study benchmarked India against a broad peer group, including Indonesia, Mexico, Malaysia, Thailand, Brazil, South Africa, Nigeria, and Turkey --economies that have each faced their own version of post-pandemic stress with varying degrees of success.

- IANS