How to strengthen Indian rupee without a rate hike

The article examines measures to strengthen the Indian rupee amid FPI equity outflows of around $30 billion and narrow interest rate differentials with the US, with USD/INR at 95.70 and the 40-country REER undervalued by around 10%. GOI and RBI have announced measures including removal of withholding tax on government bonds, full hedging cost for incremental FCNR(B) deposits, concessional swap windows for PSU ECBs, and expanded FAR bond access for FPIs, expected to bring capital flows of around $70 billion. The article also proposes an FX Cash Reserve Ratio of 20% on banks' importer forward positions, estimated to push the one-year forward premium from 2.85% to around 4.35%, as an alternative to policy rate hikes to address the estimated $185 billion in importer leads and exporter lags.