Indian economy is well-cushioned against external vulnerabilities: Goldman Sachs

Indian foreign direct investment (FDI) has been declining ever since the pandemic struck the Indian economy. In fact 2023 is seen as the year which witnessed a whopping FDI decline.  But Goldman Sachs economists feel that inflows of foreign direct investment into India are likely to remain muted. .  According to Goldman Sachs Research estimates, the net FDI has fallen sharply from a peak of $44 billion in the fiscal year 2020-21, and it will drop lower to $22.1 billion in the 2023-24 fiscal year. 

According to Goldman Sachs, slower economic growth among India’s trading partners has impacted its growth of exports in products. “But the export of services has been robust despite weaker demand from western countries, and although growth as a percentage of GDP may have peaked,” Santanu Sengupta wrote. According to him, the sector will cushion India’s wide deficit in the trade of goods.

Talking about India’s external obligations, Goldman Sachs said that India’s external obligations appear stable or promising as well. India has the lowest external-debt-to-GDP ratio among its peers in the market: around 18 per cent, compared with figures hovering around 40 per cent for South Korea, Thailand, and South Africa. The RBI is also likely to continue intervening in the foreign-exchange market to keep the Indian rupee in a state of low volatility against the dollar.