India trade deficit affects rupee: Economic Survey

The government swiftly moved to correct the situation through restrictions on non-essential imports like gold, custom duty hike in gold and silver to a peak of 10 per cent, and measures to augment capital flows through quasi-sovereign bonds and liberalization of external commercial borrowings, it said.

The RBI also put in place a special swap window for foreign currency non-resident deposit (banks) [(FCNR (B)] and banks’ overseas borrowings through which US$ 34 billion was mobilized.

The one-off flows arrested the negative market sentiments on the rupee and, in tandem with improvements in the BoP position, led to a sharp correction in the exchange rate and a net accretion to reserves in 2013-14.