$32 billion inflows from India's forex drive yet to boost rupee
India has successfully attracted $32 billion through forex deposit measures, yet the rupee has failed to see significant gains. The currency remains pressured by geopolitical tensions in the Middle East and the central bank's intervention strategies.
Why it matters
The failure of these inflows to stabilize the rupee highlights the complex interplay between capital inflows, central bank policy, and global market sentiment.
India’s plan to boost inflows into the country has got off to a strong start, with the central bank Governor Sanjay Malhotra saying banks have garnered $32 billion under the various measures announced.Even so, the inflows have yet to bolster the central bank’s foreign currency assets or significantly ease rupee liquidity in the banking system. The rupee has also seen more muted gains than during a similar drive to tap diaspora wealth in 2013, the year of the taper tantrum.Here are four charts to illustrate how the measures are showing up in various market metrics:Muted Rupee 132726275The rupee’s reaction has been muted compared with 2013, when the currency rallied more than 10% in the first 37 days after the deposit measures were announced.This time, the rupee rebounded as much as 3% from its record low in May.
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