Economist and former NITI Aayog Vice-Chairman Arvind Panagariya has urged the Reserve Bank of India to allow the rupee to weaken beyond the ₹100/USD psychological barrier, arguing that depreciation is the appropriate response to rising oil-related external pressures. In a series of posts on social media platform X on Thursday, Panagariya argued that "100 is just a number, like 99 and 101" and warned policymakers against letting the psychological barrier dictate monetary strategy. The economist cautioned against defending the psychological level using forex reserves, calling such efforts futile. His latest comments come amid renewed focus on the rupee's trajectory as rising crude oil prices and concerns over global energy supplies put pressure on India's trade balance. Panagariya emphasized that "whether the oil shortage is short-lived or long-lived, the right response at this moment is to let the rupee depreciate."
Union Commerce and Industry Minister Piyush Goyal announced on Thursday that all arms of the government are working together to address the sharp fall in the Indian rupee against the US dollar. Speaking to the media on the sidelines of the Annual Leadership Summit of The American Chamber of Commerce, Goyal said the government is closely monitoring the evolving situation and several measures are under consideration to stabilise the currency. According to reports from The Hindu BusinessLine, the minister expressed confidence that India would emerge stronger despite the challenging global environment.
The Indian rupee has demonstrated mixed performance in recent weeks, with the currency reversing a nine-day losing streak to gain 0.65 per cent and close at ₹96.20/USD on Thursday. However, the Indian rupee remains the worst-performing Asian currency, having depreciated 6.6 per cent in 2026 amid rising crude oil prices, elevated global bond yields, foreign fund outflows and geopolitical tensions. As reported by Business Standard, Panagariya emphasized that "whether the oil shortage is short-lived or long-lived, the right response at this moment is to let the rupee depreciate." If the shortage is short-lived, lasting three months to a year, the rupee will substantially recover once the oil import bill shrinks. If the oil shock proves more persistent, however, attempts to defend the rupee through intervention would only drain foreign-exchange reserves without altering the underlying pressures.
Panagariya highlighted that the Indian economy is in a much better position now compared to 2013, with inflation much lower. Consumer price index-based (CPI-based) inflation edged up in April to 3.48 per cent, remaining below the RBI's target of 4 per cent. The economist noted that "this is not 2013: Inflation was in double digits in 2013. Thanks to your prudent monetary management, that is not the case now." He emphasized that the economy is well-positioned to absorb some inflationary pressure that will accompany the depreciation, with projections potentially revised upwards in the next monetary policy meeting in June as pump prices of diesel and petrol have been hiked in May due to sharp rise in crude oil prices following the West Asia conflict.
Panagariya strongly cautioned against schemes to attract foreign inflows, warning that "dollar-denominated bonds or high-interest dollar-denominated NRI deposits turn out to be more than a band-aid. Eventually, you will have to cross the 100-rupee-per-dollar psychological barrier." He noted that "dollar-denominated bonds and high-interest NRI dollar deposits are costly instruments that pay significantly higher interest than the rate India earns on its own foreign-currency reserves. It is largely a transfer to rich NRIs." During the 2013 currency crisis amid the taper tantrum, the Indian central bank offered schemes to swap US dollars from foreign currency non-resident deposits into rupees at concessional rates, but experts indicate such schemes are not feasible now due to higher US interest rates. Panagariya warned that "a resort to anything other than depreciation will be a losing proposition," adding that the central bank would eventually still have to cross the psychological barrier after depleting reserves.
