India's authorities have introduced several policy measures aimed at addressing macroeconomic volatility and supporting the Indian Rupee (INR), according to DBS Group Research economist Radhika Rao [1]. On Friday morning, the government raised fuel prices, with petrol and diesel prices increasing by approximately INR 3 per litre. Specifically, petrol prices rose by INR 3.14 per litre to as high as INR 97.77 per litre in several cities, while diesel prices climbed by INR 3.11 per litre to up to INR 90.67 per litre [1].
In addition to fuel price hikes, the government announced an increase in import duties on gold and silver and tightened certain administrative requirements in an effort to curb inward purchases and reduce incremental demand for dollars [1]. Press reports also indicate that authorities are considering a cut in the withholding tax on foreign bond investors, which could further influence capital flows [1].
The debt category has experienced foreign portfolio investor (FPI) outflows totaling $613 million in FY27 year-to-date, following $2.8 billion in inflows during FY26 under the general limit, VRR, and FAR windows [1]. In the near term, the performance of the INR is expected to remain sensitive to news headlines and equity flow dynamics, with the currency likely to remain weak until equity outflows reverse [1].
CONCLUSION
India's recent policy actions, including fuel price hikes and increased import duties, are targeted at stabilizing the Rupee amid ongoing market volatility. However, with continued FPI outflows and sensitivity to equity flows, the INR may remain under pressure in the near term. Further measures, such as potential tax changes for foreign investors, are being considered to support the currency.