Goldman: RBI Moves To Shore Up Capital Flow Unlikely To Work

Goldman note that “the RBI has announced a series of measures with the aim to liberalize and boost capital flows into India over the next few months. This has come on the back of onshore cash dollar shortage and a fall in onshore forward premiums in recent days. In our assessment, the incremental impact of these measures on capital flows is likely not going to be significant enough to materially alter our external balances view. With external vulnerability rising, we recently re-calibrated our current account deficit forecasts to 3.2% of GDP for CY22 and see a large balance of payment deficit of 1.9% of GDP this year. We forecast USD/INR at INR80, INR81, and INR81 over 3-, 6- and 12-month horizons, with risks tilted towards even further weakness in the event of more acute broad Dollar strength.”