India’s plan to boost inflows into the country has got off to a strong start, with the central bank Governor Sanjay Malhotra saying banks have garnered $32 billion under the various measures announced.Even so, the inflows have yet to bolster the central bank’s foreign currency assets or significantly ease rupee liquidity in the banking system.
The rupee has also seen more muted gains than during a similar drive to tap diaspora wealth in 2013, the year of the taper tantrum.Here are four charts to illustrate how the measures are showing up in various market metrics:Muted Rupee 132726275The rupee’s reaction has been muted compared with 2013, when the currency rallied more than 10% in the first 37 days after the deposit measures were announced.This time, the rupee rebounded as much as 3% from its record low in May.
Those gains have since faded as renewed hostilities in the Middle East pressure the currency.
The Reserve Bank of India has sold dollars in recent sessions to support the rupee, according to traders.The rupee remains sensitive to crude prices, while the deposit push offers only marginal support because it has no direct impact on the foreign exchange, Barclays Bank Plc strategists including Lemon Zhang wrote in a note.
