India better placed as dollar weakness looms, says economist

India better placed as Dollar weakness looms, says economist at Elara Dialogue

India is better positioned than many emerging markets to ride out a potential period of US dollar weakness, thanks to strong domestic demand, healthy reserves, and improved policy credibility, according to Adam Wolfe, Emerging Markets Economist at Absolute Strategy Research.

Speaking at Ashwamedh – Elara India Dialogue 2025, Wolfe said the dollar appears to be shifting into a weaker cycle after a decade of strength, driven by moderating U.S. growth and narrowing interest rate differentials. However, he cautioned that emerging markets may not enjoy the kind of broad-based boom last seen from the late 1990s to 2011.

“From the late 1990s to 2011, emerging markets enjoyed a golden age. Growth surged, currencies strengthened, and capital inflows were strong. We may be heading into another period of dollar weakness, but I don’t think EMs are set for a repeat of that golden era,” Wolfe said.

While earlier EM outperformance was fuelled by China’s rapid industrialisation, a commodity super-cycle, and favourable demographics, those tailwinds are weaker today. “The next decade for India may not look like China’s past, but India can still deliver steady, robust growth. That should attract capital, especially as investors look to diversify EM exposure away from China,” Wolfe noted.

He pointed out that China’s shift towards a consumption-driven growth model and weaker commodity demand would reduce spillover benefits for other EMs. Against this backdrop, differentiation will be key. “It’s not about buying EM beta anymore. It’s about identifying which countries can generate sustainable returns,” he said.

For India, factors such as a more stable rupee, resilient external balances, and ongoing reforms make it stand out. “India’s growth is not overly reliant on exports or commodity cycles, and policy credibility has improved over the years,” Wolfe explained.

Wolfe also stressed that while a weaker dollar could ease external pressures, it would not automatically deliver outsized growth. “EM governments need to keep building resilience. Sound macro frameworks, credible central banks, and reforms that boost productivity will matter more than ever,” he said.

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