Daijiworld Media Network- New Delhi
New Delhi, Jul 30: India’s carefully calibrated approach to capital account liberalisation and the Reserve Bank of India’s (RBI) proactive foreign exchange strategies have together acted as a vital buffer for the Indian economy amid mounting global uncertainties, says a report by Motilal Oswal.
The report notes that India’s external sector has evolved significantly in the past decade, transforming from a position of vulnerability during the 2013 taper tantrum to one of strength and resilience in FY24–FY25. Back then, the country grappled with a widening current account deficit (CAD), low forex reserves, and dependence on volatile capital flows.
Today, India boasts record-high forex reserves of USD 691 billion (as of May 2025), with an import cover of 11.4 months, marking a solid defense line against global volatility and tariff risks.
“India’s selective capital account liberalisation and RBI’s strategic FX management have offered critical protection from global shocks like trade disputes and divergent monetary policies,” the report said.
The CAD has narrowed to 0.7% of GDP in FY24 and is expected to be around 0.6% in FY25, thanks to a robust services trade surplus, record remittance inflows, and controlled import growth. This, the report adds, reflects a structurally stronger and more stable macroeconomic position.
Another highlight is the stability of the Indian rupee, which has remained among the most stable currencies across both emerging and developed economies—signaling global investor confidence in India's policies.
With a deliberate push towards export diversification and a cautious opening of financial markets, India continues to strengthen its external position, even in the face of global financial turbulence.
“This approach has ensured India remains on strong footing, despite renewed stress in global capital markets,” the report concluded.