Citi’s India desk warned the government may tighten capital controls as the rupee slides past a 7% loss against the dollar, the steepest drop among Asian currencies in 2026. Officials have already lifted fuel taxes and raised gold import duties to curb outflows, but soaring oil costs from the Middle‑East conflict are straining the current‑account gap. The pressure also threatens sovereign bond demand.

Citi economists led by Samiran Chakraborty said a second wave of measures could target outbound investment by Indian firms, force faster repatriation of exporters’ foreign‑currency earnings, and hike import duties on edible oils. The note flagged a “high” probability of tighter overseas‑direct‑investment curbs and accelerated export‑remittance rules within the next month, aiming for an immediate boost to foreign reserves. Such actions would also tighten liquidity for corporate borrowers.

While tighter curbs promise swift currency support, they risk souring investor sentiment and could deter future capital inflows. Citi noted that liberalising foreign‑investor access or fast‑tracking inclusion in the Bloomberg Bond Index would be more sustainable, yet such steps take months to materialise. Policymakers therefore face a trade‑off between short‑term stabilization and longer‑term market confidence. Investors will watch the RBI’s response closely.