India's initiative to attract funds from its diaspora has yielded stronger-than-anticipated inflows, aiding the Reserve Bank of India's efforts to stabilize the rupee. The central bank announced that $40.8 billion has been received since a campaign launched in June to draw foreign exchange from overseas citizens.
These inflows are crucial as India, a significant oil importer, faces rising energy costs due to the conflict in Iran. The rupee has depreciated 6% against the dollar this year, making it one of Asia's weakest currencies, and the nation is on track for a third consecutive fiscal year with a balance of payments deficit. Economists noted the robust inflows, partly attributed to finance minister Nirmala Sitharaman's push for state-owned banks to engage with the diaspora, offering preferential rates and leverage on deposits.
According to Madan Sabnavis, chief economist at Bank of Baroda, the total could approach $60 billion by September. This influx provides greater flexibility for RBI governor Sanjay Malhotra ahead of a monetary policy announcement, with most expecting interest rates to remain unchanged despite rising inflation. The success of the scheme is also linked to the diaspora's growth to 37 million people.
Source: Financial Times Markets · Summarized by HeadlinesBriefing