RBI?s cup of woes on account of foreign capital inflows and consequent pressure on the rupee is set to brim over.
International rating agency Standard & Poor?s (S&P) has predicted a huge rush of funds to emerging markets, including India, in the near future.
?We expect that $400-600 billion from Opec countries would avoid US markets, which have been hit by the subprime crisis, and head straight towards emerging markets, including India,? David Wyss, chief economist, Standard & Poor?s, told a media conference on Tuesday.
Wyss said there might have been fund outflows from the Indian market immediately after news of the subprime crisis broke, ?But that?s in the past. What I see now is a rush of inflows toward India.?
According to him, the US subprime housing crisis will not peak until 2009 and total credit defaults could reach $150 billion.
Neither Wyss nor Subir Gokarn, chief economist, Asia-Pacific, S&P, however, feel that the fund inflows should be seen as a problem. ?India needs investments and inflows are good for the country,? said Wyss. ?There are many options open to the RBI to manage inflows and each one has its cost and benefits,? added Gokarn.
Emerging markets were far less vulnerable to the ongoing credit market turmoil than during previous crises because of the capital inflows, which have been attracted by high economic growth coupled with improved corporate governance, said Wyss.
