India Reals In $7 Billion Amidst Rupee Stability Measures

India has attracted significant foreign investment, with $7 billion flowing in from foreign institutional investors (FIIs) after recent government measures to stabilize the rupee.

The Indian rupee has shown resilience, appreciating approximately 2.2% against the US dollar by the close of June, recovering from a low point in May.

These stabilization efforts included tax exemptions on sovereign bonds for FIIs and FPIs, subsidized hedging costs for FCNR(B) deposits, and a concessional dollar-swap window for public sector bank loans.

Despite renewed geopolitical tensions increasing pressure on the exchange rate, the outlook remains positive. The average crude oil price for India's basket is now expected to be $80 per barrel or lower, projecting savings of $30-35 billion in the oil import bill.

Further bolstering confidence, India's foreign currency reserves rose by $4.4 billion in a recent fortnight. Commercial paper issuances surged to a 55-month high in June, and incremental bank credit in Q1 FY27 increased substantially compared to the previous year.

Banks have mobilized an estimated $3-4 billion through the revised FCNR(B) deposit scheme. Bankers anticipate accelerated inflows, especially from non-resident Indians in the Gulf, with expectations of attracting $40-50 billion over time due to higher interest rates and covered hedging costs.