India remains less exposed to external shocks: Moody's

Global rating agency Moody’s on Thursday said that India is less exposed to external risks than the other sovereigns in emerging market pack.

“The positive outlook on India’s Baa3 rating reflects our view that the relatively resilient growth and the policy reform momentum will slowly stabilise inflation. It also is expected to improve the regulatory environment, increase infrastructure investment and lower government debt ratio,” Moody’s Investors Service said in a statement.

The financial market turbulence in emerging markets over the past two years has highlighted the differing shock-absorption capacities among the five largest Baa-rated emerging market sovereigns.

These five countries are-  Turkey (Baa3 negative) , Brazil (Baa3 stable) , South Africa (Baa2 stable) , India (Baa3 positive) and Indonesia (Baa3 stable) .

For many of these sovereigns, varying degrees of turbulence were prompted by capital outflows in anticipation of the US Federal Reserve’s planned  hike in the interest rate and sharper-than-expected slowdown in growth in China.

Indonesia remains exposed to financial market turbulence and also has strong links to China and thus exposure to China-related risks.

While its economic growth is consequently slowing down, this is occurring from a high level and still remains robust relative to peers. This, along with its low level of government debt, to some extent offsets the external risks to Indonesia's sovereign credit profile. hence the stable outlook on its Baa3 rating.