RBI moves to prop up the rupee India's central bank intervened on Thursday to prop up the rupee a day after the struggling currency had fallen to its lowest ever rate against the dollar. The Reserve Bank of India introduced measures forcing exporters to convert income into local currency, prompting a rally in morning trading. The move requires Indian exporters to transfer half their overseas earnings into rupees, replacing a system in which 100 per cent could be kept in foreign currency, creating an inflow of foreign funds. The rupee has come under increased pressure in recent weeks, following concerns over a widening trade gap and a sharp decline in foreign investment flows. India requires foreign capital to fund its current account deficit, but inflows dropped sharply in March and April as investors digested a series of proposed taxation changes announced by India's finance ministry in its annual budget. Analysts predicted that Thursday's intervention could prompt a dollar inflow in the region of $2.5bn, sufficient to cover India's need for foreign funding in the short term. "We estimate India's financing gap is about $2.3bn a month, which needs to be filled by inflows," said Puay Yeong Goh, Asian currency strategist at Credit Suisse. This measure helps to finance this gap in the near term, supporting the currency against further falls. But the rupee is likely to face further pressures as India's current account deficit is projected to rise to about 4 per cent of gross domestic product this year, suggesting further interventions may be needed, analysts said. Shubhada Rao, Chief Economist at Yes Bank in Mumbai, said: "The RBI will want to keep some measures up their sleeve in case there is a worsening of the euro crisis, for instance, especially while economic fundamentals remain weak and there is pressure on the current account through higher imports." Potential future interventions could include measures to encourage capital inflow from non-resident Indians, including measures to increase bank deposits or the introduction of special bonds for Indians living abroad, Mr Rao said. But any longer-term attempt to strengthen the rupee would also require action to increase investment and reduce India's fiscal deficit, where growth has declined to about 6 per cent during the past year, analysts said. Ananth Narayan, global market head for South Asia at Standard Chartered in Mumbai, said: "What we need is that the time the RBI buys with these limited interventions should be used for action on these broader problems. That is what the market is waiting for.