Since the RBI’s April monetary policy, risks have started – oil prices are up 11 per cent, US yields have been closer to 3 per cent and the US dollar index is up 4 per cent. A combination of higher US yields and US dollar is never a good combination for emerging markets (EMs) and add to that the spectre of rising oil prices – the risks are alive for India. Indeed, foreign institutional investors (FIIs) have pulled out roughly $6.6 billion since April and the rupee has depreciated the most in the Asia ex-Japan (AXJ) region.
These headwinds expose the
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