P Notes to Help Economy

If the surge in dollar inflows continues and there is pressure to keep rupee appreciation in check, it is expected that RBI could further monitor inflows, including those in real estate, lower domestic rates to encourage inflows and propase more measres to encourage outflows.
SEBI's approval of the draft circular on P notes come on the back of strong trendsin capital inflows and in attempt to temper the pace of rupee appreciation. The 50 bps cut in the fed funds rate, forex reserves have risen by $57.5 billion during the fiscal year.
The proposed P note measures would temper the pace of portfolio investments coming to INDIA. But even if one excludes all the portfolio flows, it is estimated that capital flows to be more than sufficient to finance India's current account deficit and there will be some increase in reseves.
The market currently though has been consistenly rising after the SEBi anoouncement of new measurements. However, if these measures are followed rapidly by large scale FII registration of entities currently using P notes it would improvetransparency in the maket which would bring more inflows.