India should prepare a plan to respond to volatility in global currency markets that may come as the U.S. Federal Reserve reduces monetary stimulus, the International Monetary Fund staff said in a report.
It’s fashionable to say the era of strong emerging-market growth is over. As the U.S. recovers, the global cost of capital will rise, holding back investment; against this background, avoiding the next crisis is the best that most emerging economies can do. If you take this view, India might seem a perfect example, with its widening current account deficit, heavy public borrowing, persistent inflation and weak currency.
The Reserve Bank of India signaled elevated inflation is limiting room to cut interest rates even as its focus may shift to spurring growth as the government implements an overhaul of economic policies.
Goldman Sachs Group Inc. warned that “negative feedback loops” triggered by waning investor confidence are threatening India’s finances, after state-owned lenders’ bond risk surged the most in Asia this quarter.