ET Graphics: BoP stability tested by outflows & Rupee fall
Anoushka Sawhney looks on:
Rajani Sinha, Chief Economist, CareEdge Ratings, said that in case of additional pressure on the rupee, the RBI may consider a range of measures, including reopening the foreign exchange clearing window for OMCs, offering incentives for FCNR(B) deposits and further liberalization of capital inflows.
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To stabilize the currency, policy actions other than traditional rate hikes will be taken, including removal of withholding tax for foreign investors in government bonds, issuance of foreign currency denominated bonds by PSBs on hedging basis and deposit scheme to attract non-resident inflows, said Radhika Rao of DBS BANK ED.
“It is the shrinking capital account surplus, rather than the widening current account deficit, that is weighing on the BoP. We expect policymakers to create favorable conditions for state-owned lenders to increase foreign exchange holdings, among other measures,” said Aastha Gudwani, Chief Economist at Barclays India.
ET Bureau
