"This reduced limit would also apply to remittances made under the ODI scheme by Indian companies for setting up unincorporated entities outside India in the energy and natural resources sectors," the RBI said.
Reacting to the RBI measures, Neeraj Gambhir, MD, Nomura (India), says that the measures will have a meaningful impact. "It was really a role which allowed Indian companies to expand their operations offshore and the impact will be about USD 4 billion."
On whether the continuation of overseas direct investment under the approval route and the ban on using savings upto USD 200,000 to buy land abroad will be major restrictions, Gambhir adds, "I am not sure whether this will have a large impact. But it is a token gesture to indicate that certain kinds of capital controls on outflows are under consideration and signals a tactical shift from a pure interest rate-driven defence of the currency."
Gambhir explains that there is little expectation of a further sharp fall in the rupee. "The only caveat that I would like to highlight is that since the rupee is now a global currency, it needs to be seen what happens to the dollar as a currency versus the emerging market or G10 currencies."
On the market sentiment that will be prevalent on Friday, Ashutosh Raina, head - forex trading, HDFC Bank says that despite the RBI's controls on capital-flows, the undercurrent bias on the dollar strength will prevail. "So, there may be some more measures coming in the days to come."
On the level that the dollar will open at on Friday, Raina says that the dollar's reaction will be at 50- 60 paise lower than Wednesday's closing. "However, I don't think this will cause much impact in the days to come."
SBI chairman Pratip Chaudhuri adds that the cost of deposits was high and says that the RBI needed to clarify if these measures would be rolled back. "Our endeavour must be to get equity-linked foreign flows."
Bhanu Baweja of UBS says that India is at an interesting juncture and adds that he prefers fixed income assets to equities in India.
Former finance secretary S Narayan, reacting to the RBI's measures, says that there is considerable panic in the government. "It is very sad because the government could see this coming a year ago when the CAD was already 3 percent of GDP, exports were falling and imports were on the increase. And yet it did nothing."
"These are absolute panic measures and will lead altogether have an impact of USD 5-6 billion. The government has returned to the regime of capital control which was dismantled in the early 1990s. Several of these measures will only put greater pressure on the rupee in terms of overseas speculation."
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