If you go back in time around mid-2013, India appeared to be slipping into a serious crisis on several macroeconomic fronts. The Indian rupee had lost a sixth of its value against the US dollar. The economy was grappled by the twin deficits. It goes without saying that investors were dumping Indian stocks at the time.
Coming to the recent turmoil in the global financial markets... The slowdown in China coupled with some desperate monetary measures taken by the country's policymakers threw the global currency and stock markets in chaos.
The Indian stock markets witnessed a massive jolt on Monday. The Indian rupee too witnessed severe battering.
This compels us to compare the recent crash with the crisis-like situation around mid-2013. Are investors looking to make a quick exit from the Indian market? The answers seems to be no.
Despite the Monday market crash and the emerging market currency turmoil, the long term attractiveness of the Indian markets has not been dented. India has been one of the most resilient emerging economies in the context of the recent yuan devaluation and slowdown in China. In fact, India appears to be preferred refuge for emerging market stock investors.
Some of the key factors that work in India's favour are its lack of dependence on exports to China. Also, being a net importer of crude oil, the crash in crude oil prices has been a big boon for India.
As the Reserve Bank of India governor Raghuram Rajan has said aptly pointed out, this time is different and India is no more in the club of 'fragile five' or 'troubled ten'.
Of course, it would be foolish to ignore some serious challenges that India's economy is facing. The NPA levels of Indian PSU banks are a matter of worry. A large number of stalled projects are weighing down on India's recovery. And if the manufacturing sector doesn't pick up as envisioned by PM Modi, creating employment and sustainable long term growth will remain distant dreams.