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Rating agency Moody’s said India is less exposed to global risks among emerging market economies because of its more resilient economic growth and the impact of positive policy reform momentum.

A Moody’s report says trends in global capital flows have caused Brazil and Turkey to register the sharpest exchange rate depreciation and loss of reserves in the first half of 2015, while India proved comparatively resilient to these market developments.

Emerging market (EM) sovereigns have diverging shock-absorption capabilities to withstand the risks that will continue to impact global credit quality in 2015-16, the report said.

Moody’s said the main external risk facing EMs is the potential for a prolonged risk aversion, prompted by hopes of normalization of the US monetary policy and possibility of a sharper-than-expected slowdown in China’s growth.

The report focuses on five Baa-rated sovereigns — Turkey, Brazil, South Africa, India and Indonesia.

“India is less exposed to external shocks than the other sovereigns discussed here. The positive outlook on its Baa3 rating reflects our view that the relatively resilient growth and the policy reform momentum will slowly stabilize inflation, improve the regulatory environment, increase infrastructure investment and lower government debt ratios,” it said.

“In contrast, we forecast strong growth in India of around 7-7.5 percent per year in 2015-16, the highest among the G20 economies, which is supported by lower oil prices that will reinforce gradual growth enhancing reforms,” it said.

Moody’s said although India, South Africa and Brazil had weaker fiscal positions than Turkey and Indonesia, these governments were less reliant on foreign currency and non-resident funding (government external debt).

The rating agency made a special mention of India’s significant monetary tightening in 2013, coupled with some fiscal consolidation, which is “an example of effective macroeconomic management that restored macroeconomic stability, albeit at the expense of near-term growth”.

(Source – Assorted with the Inputs from PTI)

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