Speaking at an event, RBI Deputy Governor T Rabi Sankar acknowledged the potential for market volatility given the change in leadership of the world’s largest economy.
“There will be short-term volatility in most markets because we are witnessing a change in govt in the world’s largest economy and the most powerful country. If you move away from short-term volatility arising from the gain in the dollar index, US stocks, or US interest rates, the impact will depend on the shape of global tariffs and whether US debt increases due to higher expenditure or tax cuts,” Sankar stated.
However, he said that India is prepared to manage any excessive fluctuations in the exchange rate. Sankar pointed to the anticipated influx of capital into India following its inclusion in global bond indices as a key factor in mitigating potential volatility.
Sankar said that while increased US debt issuance could impact interest rates globally, India is expected to weather this due to the significant capital inflows. These inflows stem from the country’s inclusion in major global indices, with half already received and the remaining expected in the coming months.
“Given this, we should be able to manage even interest rate volatility,” he added.(With ToI inputs)