Higher US yields could push India towards export-led growth: SBICAPS
The research notes that India’s economic fundamentals remain relatively stable, supported by anchored inflation, gradual fiscal consolidation and an improving sovereign credit profile
India may increasingly rely on exports and long-term investments to fuel its growth, according to a report by SBICAPS. The gap between Indian and US interest rates is shrinking, which could make it more challenging to attract foreign capital that was previously used to fund current account deficits. While India's economic fundamentals remain stable, the narrowing interest-rate differential could make Indian debt less attractive to global investors.
A structural rise in US bond yields, driven by inflation, fiscal deficits and changing global investment patterns, is leading to higher US Treasury yields. Around 75-85% of this increase has been due to inflation and monetary tightening. Factors such as persistent US government borrowing, increased Treasury issuance, and productivity gains from AI are pushing up the US economy's natural rate of interest.
For India, the main implication is a shift in external financing dynamics, with a possible move away from a growth model heavily supported by foreign capital and towards exports and sustainable investment-led growth.
Written by urgent.news from Hindu BusinessLine's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
