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Last Friday, among measures aimed at augmenting foreign currency inflows, the central
bank increased the interest rate ceilings on foreign-currency non-resident deposits. The bank
hopes this will provide support for the INR, which is close to an all-time low against the USD.
Expect the central bank—a relatively effective economic agency in a country where policy
implementation is subject to political and regional divisions—to act further to smooth any
potential INR volatility. Meanwhile, the government postponed for one year implementation
of the General Anti-Avoidance Rules and proposed amendments to the finance bill, which
should also support the INR by encouraging inward capital flows. Overall, the authorities are
regaining some policy credibility but investor confidence remains muted.
Source:Euler
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