India most resilient emerging economy: Moody’s

India has been the most resilient large emerging market economy since 2020, and its sizeable forex reserves have helped check currency volatility and reinforce confidence during global shocks, Moody’s Ratings said on Tuesday.

In a report on emerging market, Moody’s said India is well placed to manage future shocks because monetary policy frameworks are clear and predictable, inflation expectations are well anchored, and exchange rates can adjust when needed. Stating that India is “better placed” among emerging market sovereigns to manage future global shock, Moody’s said the country would also enter any future periods of stress with strong and accessible buffers.

“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. It said India had made key policy choices that support stability well before the recent stress period.

Moody’s said several large emerging market sovereigns have absorbed a series of major global shocks over the past five years without a sharp increase in risk premia or a loss of market access.

This reflects durable improvements in policy frameworks and the buildup of buffers, as well as particularly supportive external conditions. Moody’s assessed emerging market sovereigns’ track records of resilience in their funding costs and market access to volatile financial conditions.

It focussed on large emerging market countries (India, Indonesia, Mexico, Malaysia, Thailand, Brazil, South Africa, Nigeria, Turkiye, Argentina) over four stress episodes identified by sustained increases in global risk aversion. These are the onset of the Covid-19 pandemic in early 2020, the global inflation surge and associated US Federal Reserve tightening cycle in 2022, US regional banking stress in early 2023, and renewed tariff tensions in 2025.

Together, these episodes capture a range of external shocks that typically generate late-cycle emerging market stress through exchange-rate pressure, tighter funding conditions and refinancing risks, Moody’s said.

“Relatively accommodative external market conditions in the wake of recent shocks helped emerging markets absorb successive external shocks since 2020,” it noted.