India's New Measures to Boost Foreign Capital Inflows

The Reserve Bank of India and government initiatives are projected to attract USD 35-40 billion in foreign capital, potentially bridging India's BoP gap in FY27. Key measures include incentives for FCNR(B) deposits and easing investment rules in government securities to strengthen external stability and foreign exchange reserves.

The Reserve Bank of India (RBI), in collaboration with the government, has announced measures to lure foreign capital inflows estimated to reach USD 35-40 billion. These initiatives are designed to address the expected balance of payments (BoP) gap in FY27 and bolster India's foreign exchange reserves.

A Yes Bank report indicates that these strategies aim to facilitate foreign capital inflow during a period when India seeks to alleviate rupee pressure and enhance external sector stability. The anticipated inflows are said to be sufficient to close the projected BoP gap and fortify the RBI's capacity to counter rupee depreciation.

Significant measures include incentives for Foreign Currency Non-Resident (Bank), or FCNR(B), deposits, with exemptions from Cash Reserve Ratio and Statutory Liquidity Ratio requirements. Additionally, the RBI will cover hedging costs on medium-term FCNR(B) deposits. These steps are expected to draw substantial capital inflows, supplemented by an increase in External Commercial Borrowings.