Ample forex kitty keeps India in comfort zone

New Delhi: India has built up buffers against cyclical difficulties and has ample foreign exchange (forex) reserves to withstand pressure on credit worthiness, S&P Global Ratings said on Thursday.

Speaking at the India Credit Spotlight 2022 webinar, S&P Sovereign & International Public Finance Ratings Director Andrew Wood said the country has a strong external balance sheet and limited external debt, making debt servicing not so expensive.

"The country has built up buffers against cyclical difficulties like those, which we are experiencing right now," Wood said. He said the rating agency does not expect the near-term pressures to have a serious impact on India's credit worthiness.

"We are expecting a strong level of GDP growth of 7.3 per cent this fiscal," he said, adding the rupee exchange rate movement against the US dollar has been moderate.

The rupee has depreciated about seven per cent against the US currency this year but has performed better than its emerging market peers. Wood said India has ample buffer in its foreign exchange reserves and the forex kitty is expected to recover to $600 billion by the end of this year. Forex reserve stood at $570.74 billion as of August 12. The US-based agency has a 'BBB-' rating on India with a stable outlook.

S&P Global Ratings Economist Asia Pacific Vishrut Rana said economic activity and consumer confidence have been improving. After a 7.3 per cent GDP growth this fiscal, the economic growth is expected to moderate to 6.5-6.7 per cent over the next fiscal year.