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India's FCNR(B) Inflows: A Fortuitous Timing Amidst Rising Global Interest Costs, Says CEA
- •Chief Economic Adviser V Anantha Nageswaran stated India might not have secured similar FCNR(B) inflows if deposits were raised in the current global environment.
- •Nageswaran highlighted that India's previous FCNR(B) deposit mobilization benefited from a "fortuitous case of timing" before a "massive spike in interest costs" began to unfold globally.
- •The CEA warned that rising interest costs would significantly impact cross-border inflows, posing a challenge for developing countries like India in capital mobilization.
- •He emphasized the need to reduce the risk premium on emerging economies and noted that "unsettled relations with the US impacts portfolio inflows."
- •The Reserve Bank of India's special USD-INR forex swap facility attracted $143.596 billion in foreign currency inflows, with FCNR(B) deposits accounting for $132.980 billion.
Key Questions Answered
Chief Economic Adviser V Anantha Nageswaran stated that India might not have attracted the same level of FCNR(B) deposit inflows if the mobilisation exercise were undertaken in the current global environment, noting that India benefited from fortuitous timing.
The Reserve Bank of India's special USD-INR forex swap facility drew $143.596 billion in foreign currency inflows as of September 18. Of this total, FCNR(B) deposits accounted for $132.980 billion.
The Chief Economic Adviser highlighted that a massive spike in interest costs and unsettled relations with the US impact portfolio and cross-border inflows. He noted these factors pose significant challenges for capital mobilisation in emerging economies like India, stressing the need to lower risk premiums.
