India braces for economic turbulence from foreign investor pullout
Stocks and currencies in a number of developing Asian markets fell this week, as global investors continued to withdraw funds in anticipation of the Fed's plans to taper its stimulus measures.
The Asian markets DID take a pause on Wednesday ahead of the release of the minutes from U.S. Fed's July policy meeting.
But over the past two days, Indonesia's benchmark index plunged over eight-percent, and India's stock market tumbled nearly six percent over the past three sessions.
The Indian rupee also slumped to a record low against the greenback on Tuesday, fueling fears Asia's third largest economy is headed towards a full-blown crisis.
"The government, acknowledges this seriousness in words, but in action, the government remains complacent."
Despite the Indian government's passive stance, experts say the situation is serious and the worst is yet to come.
"I think this time the recession is more fundamental, more India centric recession, and I think it's more serious and it could be definitely more troublesome. I think the unfortunate reality is we are in for more troubled time than the 2008 recession."
India is one of the countries most vulnerable to an exodus of foreign capital because it has been seeing its current account deficit reach new highs in recent months.
Experts say countries that have a weak current account balance and a low growth rate are most prone to a pullout.
In what's being seen as markets reacting to the end of the so-called "Bernanke boom", countries like Brazil and South Africa have also seen their currencies weaken as of late.
Analysts expect Korea to remain relatively safe from any drastic pullout as it has been posting a current account surplus month after month.
Yoo Li-an, Arirang News.
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