Financial woes may affect India more than China
The current turmoil in the financial markets could hurt Indian markets more than China’s.
By TNN |
MUMBAI: The current turmoil in the financial markets could hurt Indian markets more than China’s. However, the ratings outlook for India is unlikely to be reviewed, according to global ratings agency Fitch Ratings, as the key ratios, government finances and external finances continue to be maintained. The impact of the subprime crisis is unlikely to cast its shadow on the banking sector, it felt.
India could be more vulnerable to global financial market shocks than China as India’s exposure to foreign currency instruments is much higher than China’s, said James McConark, senior director, sovereign, Fitch Ratings, while speaking at a seminar on India and China in Mumbai on Tuesday. India’s global bond exposure is around $20 billion, while China’s is less than $6 billion, Mr McConark said.
Though the Chinese economy is more integrated with the global economy than India’s, the Indian financial sector is more integrated with the global markets than China’s. China, however, is more exposed to a slowdown in global growth, he said.
There are many areas where China and India are compared on the same footing, but there are many myths in these comparisons, according to Fitch. For instance, China’s FDI potential is ranked 55, while India is way below at 119.
Though FDI in India is growing, it will still be a long way for India to attain FDI levels anywhere closer to China’s. Though India’s governance standards are perceived to be better than China’s as far as business environment is concerned, China is viewed to be easier than India. However, courts settle law suits in India faster than in China.
Ambreesh Srivastava, senior director, financial institutions, Fitch Ratings, said the US subprime crisis will not affect the banking sector, but will affect specific financial institutions like the brokerages and insurance firms with riskier asset profile.
Making a presentation on the Indian and Chinese banks, Mr Srivastava said loan growth in India has been faster than that in China in the last three years, making it (India) more vulnerable to sticky assets. It has already started showing in some bank balance sheets like that of ICICI Bank, he said.
The banking systems in both countries have improved, especially in terms of capitalisation and asset quality. However, there is still more scope for reforms in China, he said.
India could be more vulnerable to global financial market shocks than China as India’s exposure to foreign currency instruments is much higher than China’s, said James McConark, senior director, sovereign, Fitch Ratings, while speaking at a seminar on India and China in Mumbai on Tuesday. India’s global bond exposure is around $20 billion, while China’s is less than $6 billion, Mr McConark said.
Though the Chinese economy is more integrated with the global economy than India’s, the Indian financial sector is more integrated with the global markets than China’s. China, however, is more exposed to a slowdown in global growth, he said.
There are many areas where China and India are compared on the same footing, but there are many myths in these comparisons, according to Fitch. For instance, China’s FDI potential is ranked 55, while India is way below at 119.
Though FDI in India is growing, it will still be a long way for India to attain FDI levels anywhere closer to China’s. Though India’s governance standards are perceived to be better than China’s as far as business environment is concerned, China is viewed to be easier than India. However, courts settle law suits in India faster than in China.
Ambreesh Srivastava, senior director, financial institutions, Fitch Ratings, said the US subprime crisis will not affect the banking sector, but will affect specific financial institutions like the brokerages and insurance firms with riskier asset profile.
ADVERTISEMENT
Making a presentation on the Indian and Chinese banks, Mr Srivastava said loan growth in India has been faster than that in China in the last three years, making it (India) more vulnerable to sticky assets. It has already started showing in some bank balance sheets like that of ICICI Bank, he said.
The banking systems in both countries have improved, especially in terms of capitalisation and asset quality. However, there is still more scope for reforms in China, he said.
Start a SIP with as low as ₹500 with ET Money App!
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
