Credit rating agency Fitch Ratings has said that India’s less dependence on exports and improved external balances makes it better placed than many of its peers after the American central bank -- the US Federal Reserve -- raised its key interest rates. Fitch Ratings said that India is not immune to potential market jitters on account of interest rate hike by the US Fed, but favorable economic growth outlook makes it attractive for foreign investors.
India is also less dependent than several of its peers on commodity exports and has thus not been negatively affected by the global rout in commodity prices, and also only a small part of India's sovereign debt is held by foreigners or denominated in foreign currency.
According to Fitch, India's external balances have significantly improved since mid-2013, with foreign exchange reserves rising by USD 65 billion to USD 353 billion as of November 2015, and the narrowing of the current account deficit.
For the first time in a decade US Federal Reserve has hiked interest rates by 0.25 per cent, signaling a recovery in the US economy. “With the Fed’s policy normalization underway, the Reserve Bank of India’s focus during the upcoming monetary policy reviews will increasingly shift to domestic parameters -- critical being the growth-inflation rhetoric.