Page 32 - Policy & Economic Report - July 2025

July 2026 POLICY AND ECONOMIC
ROEILPO&RGTAS MARKET

The revised ICI also reflects changes in the relative importance of different sectors within the
index. Electricity carries the highest weight of 30.93 per cent, followed by Refinery Products (22.57 per
cent), Steel (17.58 per cent), Crude Oil (7.43 per cent), Coal (5.60 per cent), Iron Ore (4.91 per
cent), Cement (4.41 per cent), Natural Gas (3.84 per cent) and Fertilizers (2.73 per cent). These nine
industries collectively provide an important indication of industrial and infrastructure activity, as they
form the backbone of the country's manufacturing and energy sectors.

Overall, the June 2026 data indicate a strengthening in India's core industrial performance, supported by
robust growth in mining, construction-related industries and electricity generation. The introduction of
the revised ICI series with a new base year and expanded sectoral coverage is expected to provide a more
representative measure of core industrial activity and improve the alignment of the index with the
evolving structure of the Indian economy.

6. RBI's FCNR(B) initiative may strengthen India's external sector with forex inflows of up to US$85
Billion

The Reserve Bank of India's (RBI) recent measures to encourage Foreign Currency Non-Resident (Bank)
[FCNR(B)] deposits are expected to significantly strengthen India's external sector by attracting substantial
foreign currency inflows during FY 2026–27. According to an SBI Research report, the concessional swap
facility introduced by the RBI could mobilize overall foreign exchange inflows of US$80–85 billion,
substantially higher than earlier estimates and well above the mobilization achieved under a similar
initiative in 2013.

The RBI announced the special swap window in June 2026 to incentivize banks to mobilize FCNR(B)
deposits, Overseas Foreign Currency Borrowings (OFCBs) and External Commercial Borrowings (ECBs),
with the objective of strengthening foreign exchange liquidity and enhancing the country's external
resilience amid heightened global financial and geopolitical uncertainties. Under the scheme, banks are
able to swap eligible foreign currency mobilized through these instruments with the RBI at concessional
rates, thereby reducing their hedging costs and encouraging greater participation by overseas depositors
and borrowers.

The response to the scheme has been considerably stronger than anticipated. RBI data indicate that by 17
July 2026, banks had mobilized approximately US$20.72 billion, comprising US$17.41 billion through
FCNR(B) deposits, US$1.97 billion through OFCBs and US$1.34 billion through ECBs. Public sector banks
have emerged as the principal contributors to the mobilization, while the amount raised within the first
45 days has already exceeded that mobilized during the three-month FCNR(B) scheme introduced in
2013.

Reflecting the strong initial response, SBI Research has revised its projection for FCNR(B) deposits
from US$40–45 billion to US$65–70 billion by the end of the scheme, while estimating total foreign
exchange inflows of US$80–85 billion. The report also expects a significant proportion of FCNR(B) deposits
maturing during August and September 2026 to be renewed, supported by higher interest rates, further
sustaining the momentum in foreign currency mobilization.

Page | 31