RBI Says Rupee May Be Undervalued Now
Reserve Bank of India Governor Sanjay Malhotra has said the rupee is not overvalued and may now be undervalued after its recent fall against the U.S. dollar. His remarks come as the currency faces pressure from the West Asia crisis, higher crude prices and concerns over India’s external balance.
Rupee Depreciation Brings Valuation Debate
Malhotra said the rupee’s recent depreciation suggests it is no longer overvalued. He added that one could argue the currency has become undervalued in both nominal terms and real effective exchange rate terms.
The rupee has weakened sharply in FY26 and has come under further pressure since the U.S.-Iran war began in late February. The currency has also moved closer to the psychologically important 100-per-dollar level.
RBI Says It Does Not Target Rupee Level
The RBI governor reiterated that the central bank does not target any specific exchange rate. He said the RBI intervenes only to curb abnormal volatility or undue speculation in the currency market.
His comments come amid wider debate on whether defending a particular rupee level is useful. Economists have argued that exchange-rate flexibility may be necessary during periods of global stress.
India Balance Of Payments Needs Attention
Malhotra said India’s balance of payments is not an undue concern yet, but needs attention from the government, RBI and other institutions. Higher crude prices could pressure the current account, but services exports, capital inflows and remittances are expected to provide support.
He said India must strengthen exports, reduce import dependence and attract capital. He also pointed to robust gross FDI inflows and improving net FDI as signs of India’s continued investment appeal.
