India’s low dependence on foreign currency borrowing limits the risks of depreciation even if the Indian currency weakened by more than 7% against the dollar in 2018, rating agency Moody’s said in a note.
“India’s low dependence on foreign currency borrowing to fund its debt burden limits the risk of currency depreciation transmitting into materially weaker debt affordability,” the rating agency said in the note on Thursday.
On Thursday, the rupee hit its all time low against the dollar breaching the 69 a dollar mark that prompted the central bank to intervene in the currency market by selling dollars.
Furthermore, while the current account deficit (CAD) had widened due to rise in oil prices, it remained modest relative to GDP and is largely financed by equity inflows, including foreign direct investment, the rating agency said.
Forex reserves
“India’s significant build-up of foreign exchange reserves in recent years to all-time highs provides a support buffer to help mitigate external vulnerability risk,” Moody’s added.
