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India's Balance of Payments Could Return to Surplus as RBI, Government Boost Foreign Inflows: HDFC MF
HDFC Mutual Fund: According to a report by HDFC Mutual Fund, measures announced by the RBI and the government in June could shift India's balance of payments from a deficit to a surplus, thereby easing pressure on the rupee.
Several major steps proposed by the Reserve Bank of India (RBI) and the government in June are likely to ensure that the balance of payments (BoP) deficit in India that has persisted for the past three years is changed to a minor surplus. This was mentioned in the July report issued by HDFC Mutual Fund.
As per the report of HDFC Mutual Fund, the June policy initiatives by the RBI and the government would help to turn around the third consecutive BoP deficit into a small surplus and provide relief to the rupee. As per an RBI move, the entire cost associated with hedging would be borne by the central bank for the new FCNR(B) deposits that have a tenure of three to five years until September 30, 2026. It is estimated that such a move can fetch about $40-$60 billion in foreign capital inflows into the country. $17 billion of foreign money has already been raised by means of this route till July 17, 2026. Besides, a concessional foreign exchange swap facility has been made available for ECBs of public sector undertakings. Such a move can generate additional $15-$25 billion in inflows.
According to the report, the RBI's decision to bear the full hedging cost on FCNR(B) deposits is crucial for boosting capital inflows. This facility will remain available until September 30, 2026, providing an incentive to investors. This initiative is estimated to attract potential investments worth $40 billion to $60 billion into India. By July 17, 2026, investments worth approximately $17 billion had already been mobilized under this scheme, signaling its success. Additionally, a concessional foreign currency swap facility for public sector undertakings serves as a major attraction. This facility is expected to encourage external commercial borrowings, potentially driving an additional capital inflow of $15–25 billion while simultaneously reducing hedging costs. All these measures will directly contribute to strengthening India's external sector.
