Since the high of the indexes in October 2021, the markets have fallen by almost 17%. Taking the current volatile situation into consideration, a black swan event might just trigger $100 billion capital outflows from India, warns the RBI.
According to a Reserve Bank of India (RBI) assessment, India is expected to experience capital outflows of up to $100 billion (about Rs 7,80,000 crore) in the case of a large global risk scenario or black swan occurrence.
A Covid-type contraction in real GDP growth, a GFC-style narrowing of interest rate differentials with the US, or a GFC-style spike in the volatility index (VIX) all carry a five percent possibility of triggering portfolio outflows from India of the size of 3.2% of GDP, or $100.6 billion in a year.
“In an extreme risk scenario or a black swan event in which there is a combination of all these shocks, there is a 5 per cent chance of outflows under portfolio investments of 7.7 per cent of GDP and short-term trade cre...
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