Indian economy linked to world, decoupling not possible in reality: Analyst

A global slowdown will have severe repercussions for India's balance of payments BoP through lower exports; a meaningful slowdown of late and lower capital inflows.

The Indian market has chartered a divergent path with most world markets over the past three months. To illustrate, the benchmark Sensex is up 7 per cent over the past three months even as the MSCI World index has declined 7 per cent.

A note by Kotak Institutional Equities says this decoupling can only be a short-term phenomenon. “We note that markets may decouple in the short term (for whatever reasons) but economic linkages will inevitably result in some ‘relationship’ between markets too. The Indian economy is too interlinked with the global economy for economic or market decoupling in reality.