Modi's victory in Lok Sabha polls makes rupee double-edged sword for RBI

The rupee could be set to gain as Prime Minister Narendra Modi’s sweeping election victory boosts foreign inflows. That may present a dilemma for India’s central bank, analysts said.

The rupee is emerging Asia’s top performer in the past three months, thanks to the gush of foreign cash. With inflows poised to accelerate after the election result, the Reserve Bank of India may have to rein in the currency or risk making the nation’s exports less competitive as rival currencies weaken.

“The RBI would not be comfortable with a sharp appreciation in light of competitiveness considerations,” said B. Prasanna, group