India Engineering BoP Stability Not Cure

ANZ Research evaluates India's new policy interventions to bolster the Balance of Payments and the INR, noting that while they provide short-term support, global headwinds remain the dominant risk.

Key Takeaways

• 1.Indian policymakers have introduced measures to shore up banking capital inflows and stabilize the BoP position and INR.
• 2.The effectiveness of these policies is limited by a difficult global environment, characterized by tight financial conditions and capital flight towards tech-heavy economies.
• 3.The INR is expected to revert to a depreciation bias against the USD after the current policy incentive schemes expire.

Table of Contents

• India: engineering BoP stability, not cure
• Policymakers have stepped up the INR's defence
• Policy steps to stabilise the INR
• Financial market liberalization
• ...but in a materially difficult global environment
• Our view
• How has this changed the outlook and risks for the INR?
• How will the RBI respond?

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