India Well-Equipped To Handle Future Shocks; Among Most Resilient Emerging Economies: Moody’s

India's reliance on domestic funding is balanced by deep local markets and sizeable reserves ... Nevertheless, India's relatively high debt burden and weak fiscal balance limit the amount of space available to respond to successive shocks, Moody’s added. Constraints from Fiscal Position Despite these strengths, Moody’s highlighted that India’s relatively high public debt and weak fiscal balance could limit its ability to respond to repeated external shocks. The agency emphasised that while buffers remain robust, fiscal constraints may restrict policy flexibility in adverse scenarios. Emerging Markets Show Broader Stability Moody’s observed that several major emerging market economies—including India, Indonesia, Mexico, Brazil, and South Africa—have managed to absorb multiple global shocks over the past five years without significant disruptions to market access or sharp increases in borrowing costs. This resilience reflects improvements in policy frameworks, stronger buffers, and relatively supportive global financial conditions. Multiple Global Stress Events Assessed The assessment covered four major stress episodes: the onset of the COVID-19 pandemic in 2020, the global inflation surge and tightening cycle led by the US Federal Reserve in 2022, regional banking stress in the US in 2023, and renewed global trade tensions in 2025. According to Moody’s, these events typically create pressure on exchange rates, tighten funding conditions, and increase refinancing risks for emerging economies. Supportive External Conditions Helped The report noted that relatively accommodative global financial conditions following recent shocks also played a role in helping emerging markets navigate volatility. Overall, Moody’s concluded that India’s policy choices, institutional strength, and financial buffers have positioned it favourably among emerging markets, even as fiscal challenges remain a key area to monitor. (KNN Bureau)