RBI Dy Guv rules out ‘weak rupee’ as policy tool

FILE PHOTO: The Indian Rupee logo is seen inside the Reserve Bank of India (RBI) headquarters in Mumbai, India, December 6, 2024
| Photo Credit:
FRANCIS MASCARENHAS

The Reserve Bank of India (RBI) does not consider a weaker exchange rate as a strategic instrument to enhance competitiveness amid global tariff challenges, stated Poonam Gupta, Deputy Governor of the RBI.

“Is the exchange rate a viable mechanism to navigate a tariff-driven global environment? Our stance is clear—it isn’t a policy tool,” Gupta emphasized during a Business Standard event in Mumbai. “In markets where exchange rates are predominantly shaped by demand and supply dynamics, no nation can sustainably leverage currency valuation for trade advantages.”

These comments, marking Gupta’s first public address since her appointment in April, dismiss speculation about potential rupee devaluation to mitigate the impact of heightened U.S. tariffs under President Donald Trump. They also temper expectations among exporters advocating for preferential exchange rates to counterbalance new duties.

While currency depreciation is frequently perceived as a stimulus for exports—notably employed by China during earlier U.S. trade disputes—the rupee has faced significant pressure this year due to equity outflows and tariff uncertainties. Recent months, however, saw a rebound following suspected RBI interventions to stabilize volatility.

Gupta also addressed critiques of India’s exchange-rate framework, particularly targeting the International Monetary Fund’s assessment: “Excessive currency fluctuation isn’t inherently beneficial—a point institutions like the IMF should acknowledge.” She highlighted research indicating that emerging markets’ reserve accumulation and managed float regimes can deliver outcomes comparable to free-floating systems.

India maintains a managed float exchange mechanism and holds substantial foreign reserves as a safeguard against global financial disruptions, aligning with practices across emerging economies, Gupta noted. Her remarks reinforce the RBI’s response to the IMF’s 2023 reclassification of India’s currency regime from “floating” to “stabilized arrangement,” citing heavy intervention.

This classification may now undergo reassessment though, as Governor Sanjay Malhotra adopts a less interventionist approach, suggested Thomas Helbling, IMF’s Deputy Director for Asia Pacific, during a recent briefing in Hong Kong.

Gupta further projected optimism about India’s economic trajectory, citing high-frequency data signaling robust growth in the latter half of the fiscal year ending April 2026. While RBI forecasts 6.8% growth for the year, she acknowledged this falls below the nation’s long-term potential.

Echoing this sentiment at the same event, Chief Economic Advisor V Anantha Nageswaran projected India’s annual growth to exceed the 6.3%-6.8% forecast range.

Gupta reiterated Governor Malhotra’s recent hint at potential monetary easing, stating, “There’s scope for further rate adjustments—timing and magnitude remain data-dependent.” The RBI has reduced its benchmark rate by 100 basis points since February before pausing cuts in October.

Published on October 30, 2025