India Nets $73 Billion in Inflows as Incentivized Deposit Scheme Bolsters Rupee
NEW DELHI — India’s aggressive campaign to attract capital from non-resident Indians (NRIs) is yielding massive results, with the country securing $73 billion in inflows over the past 11 weeks. The surge comes as the government leverages a special incentivized deposit scheme to stabilize the rupee, which has faced significant headwinds from volatile energy prices and a notable exodus of foreign institutional investment.
A Strategic Buffer Against Volatility
The initiative, centered on Foreign Currency Non-Resident (FCNR) bank deposits, has been labeled by the Ministry of Finance as one of the country’s “largest and fastest foreign-currency mobilization exercises.”
The influx of capital serves as a vital safeguard for the Reserve Bank of India (RBI). According to Gaura Sengupta, chief economist at IDFC First Bank, these reserves have provided the RBI with the necessary “headroom” to intervene in currency markets.
“The RBI is using these inflows to minimize volatility, but not to dictate the long-term direction of the currency,” Sengupta noted. While the rupee has struggled—weakening by roughly 6.5% against the U.S. dollar year-to-date—the recent inflows have prevented a more drastic devaluation. IDFC First Bank currently projects the rupee to settle near 96.50 per dollar by March 2027.
Battling the Trade Deficit
The urgency behind the scheme stems from a widening trade deficit and a broader struggle to retain foreign capital. India’s energy import bill, which constitutes over a quarter of total national purchases, surged nearly 22% between April and July. Consequently, the trade deficit ballooned to $49.3 billion during that period, up from $32.3 billion a year prior.
This macroeconomic pressure has been exacerbated by a withdrawal of foreign portfolio investment. Global investors have offloaded a staggering $24.5 billion in Indian equities so far this year, surpassing the $18.9 billion sold throughout all of 2025. This trend has placed the rupee among the worst-performing Asian currencies against the dollar, according to LSEG data.
Future Outlook
The incentivized deposit scheme is slated to close on August 31, and experts are already looking toward the post-incentive landscape. Global brokerage Nomura anticipates that total deposits could hit $80 billion by the time the window shuts, while analysts at Jefferies suggest that, when combined with other borrowings, the total figure could climb as high as $100 billion.
However, analysts caution that the relief may be temporary. Citi projects a balance of payments surplus of $53 billion for the fiscal year ending March 2027—a slight decline from the previous year’s $60 billion.
“Once the scheme closes, the trajectory of India’s balance of payments will depend heavily on global oil prices and the recovery of foreign direct investment,” a Citi report stated.
As the government celebrates its success in shoring up foreign inflows during a period of intense global market uncertainty, the focus now shifts to whether the Indian economy can maintain its external stability without the crutch of special incentives.
