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Mitul Kotecha, Senior Emerging Markets Strategist at TD Securities point out that the India’s government announced 5 key measures to reduce the trade and current account deficits and attract foreign inflows to the country.

Key Quotes

“Notably no measures were announced to reduce oil imports and in the absence of a major drop in oil prices, pressure on the current account will remain.”

“New measures such as tapping non-resident Indian deposits and a possible rate hike by the RBI could be announced in the weeks ahead.”

“We think the announced measures are likely to help provide further support to the INR over the short term, especially given the current background of slightly better EM sentiment.”

“Further out, more INR depreciation, albeit at a less rapid pace, is likely as the external environment remains challenging for current account deficit countries.”          

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