Rbis Dollar Inflow Measures Buy Time But External Risks Remain

The Reserve Bank of India's recent measures to boost dollar inflows are a temporary fix, economists warn. While these steps aim to stabilize the rupee now, the country must strengthen its balance of payments over the next three to five years. Otherwise, as foreign currency borrowings and deposits mature, the reversed inflows could pressure the rupee again, requiring a robust BoP or larger reserves.

A further risk stems from currency movements. A weaker rupee would raise the cost of servicing these liabilities, as the dollars mobilised under ECB and FCNR(B) routes become more expensive to repay in rupee terms, increasing the effective cost for the central bank.

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