India Has Sufficient External Buffers: Fitch The rating agency also added that domestic factors are the primary driver of the RBI's current monetary policy tightening

Fitch Ratings, on Wednesday, said that India has sufficient foreign exchange reserve and its current account reserve is likely to remain at sustainable levels.

"India's external buffers appear sufficient to cushion risks associated with rapid monetary policy tightening in the US and high global commodity a price, limiting any risk to India's sovereign rating from external pressures is limited," said Fitch.

The rating agency also added that, "Public finance remains the key driver of the rating and India is relatively insulated from global volatility due to the sovereign's limited reliance on external financing. India's foreign reserves fell by almost $101 billion in January-September 2022, but are still large at around $533 billion."

The decline has reversed most of the reserve accumulation that happened during the pandemic, and reflects valuation effects, a widening CAD, and some intervention by the Reserve Bank of India to support the rupee's exchange rate.

Fitch said, "Large reserves also provide reassurance about debt repayment capacity. Short-term external debt due is equivalent to only about 24 per cent of total reserves."

"Domestic factors are the primary driver of the RBI's current monetary policy tightening. However, risks to our current forecast that India's repo rate will peak at 6 per cent in 2023 to 2024 are skewed to the upside, as there is a significant chance of rate hikes I the US beyond those in our assumptions, which could put further downward pressure on the rupee and the increase in the imported price inflation," added the rating agency.