Since the Reserve Bank of India (RBI) has an inflation mandate and needs to control the rupee, it will clamp down on capital flows. Reserve Bank of India’s governor Urjit Patel is unlikely to raise the quota on debt after inflows surged and muddied policy choices. An independent monetary policy centered on inflation means that interest-rate differentials favor the rupee. The Reserve Bank of India forecasts inflation will rise toward its 4% medium-term target by March 2018. “But we think this is unlikely as the RBI is following a flexible inflation targeting regime.” Bloomberg

Source: Mint August 28, 2017 03:56 UTC