What are govt's policy options to check rupee slide?

Moneycontrol Bureau

The rupee Wednesday recovered to 57.9 to the dollar intra-day Wednesday, sparking a pullback in equities as well. Brokerage house Barclays analyses the various policy options that the government will look at to defend the rupee:

FII debt investment limit: A further increase (of, around USD 5-10 bn) in investment limit in the latter part of the year remains a possibility. However, we do not expect any change in the very near term given the paucity of demand from FIIs.

Curbs on gold: According to the government, the impact of measures to curb gold is being felt, and gold imports are expected to be lower from June. No further measures are being planned for now; however, it remains a pressure point, and one which the government has indicated willingness to tackle head-on.
 
Forex intervention: The RBI has typically chosen to stay away from intervention in the foreign exchange market in the recent past, allowing the rupee to be driven by market forces. With the rupee has now at a new low, with a further near-term weakening bias, the chances of intervention by the RBI have risen significantly.

NRI bonds: As a last resort, the government indicated it can issue USD-denominated bonds similar to India millennium deposits (done in 2000) or Resurgent India bonds (done in 1998) if need be. We believe the possibility of this issuance taking place has increased in recent weeks.