Foreign investors are dumping Indian bonds at a record pace as surging oil prices threaten to worsen the nation’s finances, stoke inflation and hurt economic growth.
Overseas funds have pulled $4.5 billion from the local debt market since the start of the year, the most in any year-to-date period in data going back to 1999. Second-quarter outflow was the biggest among the major Asian nations as Brent crude rose above $80 a barrel, the highest since 2014.
Every $10 per barrel increase in oil prices will worsen India’s current-account balance by 0.4 percent of gross domestic product and raise inflation by 30-40 basis points, according to Nomura Holdings Inc. Standard Chartered estimates inflation to climb 20-40 basis points and the fiscal deficit to widen by 0.1-0.4 percentage points of GDP.
High crude prices have also roiled financial markets of other oil-importing nations in Asia, including Indonesia. Read More