Oil Prices Remain Wildcard for Indian Economy Amid FCNR Deposit Surge
Crude oil prices remain a major concern for India's economic outlook, according to Anindya Banerjee, Head of Currency and Commodity Research at Kotak Securities. He believes that higher diesel prices can act as an inflationary burden on households and the wider economy.
Banerjee noted that foreign currency non-resident (FCNR) deposits have surged to around USD 127 billion, much higher than market expectations, providing a significant liquidity boost to the banking system.
He supported the Reserve Bank of India's decision to close the FCNR deposit window early after the inflows crossed the USD 100 billion threshold. Banerjee warned that prolonged disruptions in oil flows could push Brent crude prices significantly higher, potentially reaching USD 110-115 by the end of this year.
Banerjee also discussed the rupee's performance, stating that it is likely to face strong resistance around 96-97 due to the RBI's ability to intervene in the foreign exchange market. He ruled out a sharp rupee depreciation under normal circumstances but noted that the currency could cross the 100-mark if crude oil prices rise substantially.