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While many emerging markets have lately been in turmoil, India has been an oasis of calm. As Table 1 shows, the equity markets have in fact gained in value, with both the Sensex and the Nifty scaling new highs. Although the threat of the "taper" of quantitative easing by the US Federal Reserve in the middle of last year sent the rupee into free fall, as shown in Table 2, it has since recovered and was steady around 62 against the dollar for a while - before turning upwards recently. Foreign institutional investors, also, do not seem to have lost confidence in the Indian economy as yet, as Table 3 shows, with flows turning positive.
To an extent, this turnaround has been shaped by more positive headline numbers. It is true that both growth and the index of industrial production have remained relatively anaemic, as Table 4 shows.
But some other numbers have worked to India's advantage. In particular, India's current account deficit, as shown in Table 5, has been brought under control.
Some of that may be due to changes in the import of gold. For one, as Table 6 shows, the price of gold has come down. Also, the government imposed import restrictions on gold. As Table 7 shows, this sharply reduced gold imports in terms of both quantity and expense, which has helped relieve pressure on the current account deficit.
