India: Managing External Financing Needs

India is facing pressure on its external balances due to the energy shock from the Middle East, leading to a projected third consecutive year of balance of payments deficit. The central bank is expected to implement policy measures to encourage capital inflows and stabilize the INR.

Key Takeaways

• 1.India's balance of payments is likely to show a third consecutive deficit due to middle east energy shocks and subdued capital inflows.
• 2.The RBI is expected to maintain policy rates in June but may introduce measures to incentivize dollar inflows, such as reducing offshore funding costs or tax relief for foreign investors.

Table of Contents

• India: Managing external financing needs
• Managing external financing needs
• "Carry" flows likely to remain constrained amid lower rate differentials
• Can elevated domestic funding costs encourage dollar issuance?
• Appendix
• Revisiting the 2013 FCNR(B) deposit swap scheme
• Disclosure Appendix