Reserve Bank of India deputy governor Punam Gupta said on Tuesday that external
capital flows are highly unstable and emerging markets, including India, need to
strengthen domestic financing capacity and build buffers to withstand volatile
foreign flows. She urged countries to reduce macro-level reliance on external
financing. Despite rapid Indian growth, foreign funding has become less
reliable, increasing depreciation pressure on the rupee. Through the fiscal year
to March, capital inflows weakened sharply, forcing India to draw on FX reserves
to plug external financing gaps. Earlier this month the RBI unveiled a package
of measures aimed at curbing market bets on excessive rupee depreciation.
