India's measures to protect Indian rupee seen drawing about $40 billion, analysts say

MUMBAI: India on Friday announced a raft of measures to attract dollar inflows into the country, at a time when rising crude oil prices and record outflows from equities have pushed the rupee to all-time lows.

All new 15-year, 30-year and 40-year government bonds will be a part of so-called fully accessible route that allows unfettered foreign access; these bonds are part of three global indexes.

Caps on short-term foreign investment in bonds, concentration limits and buying of individual bonds have been done away with.

New Delhi has exempted overseas investors and the BIS from capital gains tax on interest or gains from sale of government bonds.

The Reserve Bank of India will offer a discounted forex swap for external commercial borrowings by state-run companies.

A similar facility will bear the hedging costs for banks that will raise three to five year deposits from non-resident Indians until September end.

Banks will be exempt from statutory fund requirements for these deposits.

India ramps up defence of faltering rupee after holding fire on rates

RBI will restore time for realisation for export proceeds to nine months and raise limit for investments by non-residents and overseas citizens in equity instruments traded without SEBI registration.

The combined impact could certainly help bridge the $40-50 billion gap on the balance of payments estimated for FY27 - Sakshi Gupta, principal economist, HDFC Bank.

“If global conditions stabilise over the coming weeks, the cumulative capital flow effect could be higher” – Gupta.

Foreign investors pivot to short India debt ahead of policy turn

The measures are expected to draw a minimum of $30 billion over the next four months, but there are chances of a large upside, if banks leverage FCNR flows well - Kanika Pasricha, chief economic adviser at Union Bank of India.

YES Bank and Emkay Global Financial expect inflows to the tune of $40 billion to $50 billion.