Mumbai: “From being among the fragile five pack (other members: Brazil, Indonesia, South Africa, Turkey), India is today best positioned among the emerging market (EM) economies and has gained global investors’ attention while other economies continue to remain vulnerable,” says ICICI Bank’s treasury research.
Unlike India, economies like Russia, Brazil, Indonesia, Argentina, Peru, Chile etc are net commodity exporters and are likely to remain vulnerable on sharp correction in global commodity prices. Consequently, the deterioration in the terms of trade has caused them to slide to the bottom of rankings, the research reveals.
According to Crisil, India is the only country in its basket to have witnessed a significant improvement in its growth-inflation mix. Growth is forecast to rise to 5.5 per cent in fiscal 2015 (and over 6 per cent in 2016) and inflation is expected to decline to 6.7 per cent in fiscal 2015 and 5.8 per cent in fiscal 2016.
“Turkey, Russia, South Africa and Brazil have seen growth deteriorate and inflation rise over the past year, due to unfavourable growth-inflation dynamics, making them less attractive from an investor perspective,” it said.
Further the Crisil report says that in the event of an external shock, the economies most susceptible to capital outflows would be Turkey, South Africa, Russia, Mexico, Brazil and Colombia. Barring Russia and Mexico, all are externally vulnerable with large current account deficits (CADs) that are heavily reliant on capital flows, and hence likely to see sharp depreciation in currencies.
“In contrast, India has undergone substantial external adjustment over last year and is much better placed to withstand investor flight,” says Crisil.
