Mumbai: Fitch Ratings on Wednesday said India has substantial forex reserves and its current account deficit is likely to remain at a stable level, limiting any risk to the country’s sovereign rating from external pressures.
“India’s external buffers appear to be sufficient to mitigate risks associated with bullish monetary policy in the US and higher global commodity prices,” Fitch said in a release.
The rating agency said India’s public finances continue to be a key driver of the country’s sovereign rating and its limited reliance on external funding helps.
The Indian rupee hit a record low on Wednesday and has fallen over 11% so far this year.
Fitch said the country’s foreign exchange reserves are down by $101 billion since January, but are still large.
The reserve cover on imports remains strong at around 8.9 months, up from 6.5 months in 2013 when the rupee was pressured by concerns about the withdrawal of global monetary policy adjustments.
The rating agency said the strong cover gives scope to executives to utilize the reserves to smooth out periods of external stress.
Fitch sees India’s current account deficit at 3.4% of GDP in the current fiscal.
“We expect India’s current account deficit to be wider in the next few years than in the period before the pandemic.” -Reuters
Read also: Fitch Ratings cuts India’s growth forecast for FY13 to 7% from 7.8%