Just months ago, India’s central bank pulled out all the stops to draw in dollars to bolster its foreign-exchange reserves and defend the rupee. The stronger-than-expected deluge of cash is now adding to the case for a more hawkish monetary policy stance.
The record $133 billion inflow from the Indian diaspora left banks awash with cash and pushed overnight rates below the Reserve Bank’s 5.25% policy rate, effectively making borrowing cheaper than policymakers intend.
