New Delhi, Aug. 6 -- In recent years the South Asian region has witnessed an unprecedented succession of external sector crises. Sri Lanka defaulted on its sovereign debt in 2022, Pakistan has repeatedly depended on the International Monetary Fund (IMF) for financial assistance, Bangladesh has faced increasing pressure on its foreign exchange reserves and exchange rate, while Nepal, Bhutan and the Maldives continue to remain vulnerable because of their dependence on a limited number of foreign exchange earning sectors.

Against this backdrop, India presents an interesting paradox. It is the largest economy in South Asia, the world's third-largest importer of crude oil, deeply integrated with global financial markets and heavily dependent ...