Chief Economic Adviser V Anantha Nageswaran has emphasized that the Indian rupee's movement is a natural part of macroeconomic adjustment and should not be viewed through the lens of fixed psychological thresholds such as the 100-per-dollar mark. According to reports from ANI, Nageswaran stated that currency depreciation should be understood in the broader context of external shocks, global uncertainty, and shifting capital flows rather than as a sign of domestic economic weakness. In an exclusive conversation with ANI, Nageswaran stressed that the exchange rate functions as a 'natural shock absorber' in a volatile global environment, noting that when the economy faces disruptions such as energy price spikes, supply chain shocks or geopolitical tensions, the exchange rate is often the first variable to adjust.
As reported by ANI, Nageswaran described the exchange rate as a 'natural shock absorber' in a volatile global environment. He explained that when the economy faces disruptions such as energy price spikes, supply chain shocks or geopolitical tensions, the exchange rate is often the first variable to adjust. The CEA noted that attempting to rigidly defend a particular currency level could be counterproductive for the wider economy, as policymakers face a trade-off between tightening monetary conditions to defend the currency or allowing the exchange rate to adjust while protecting domestic growth and inflation dynamics. In periods of global stress, this trade-off becomes particularly acute, requiring careful consideration of the broader economic implications.
Addressing concerns around the rupee potentially crossing the 100-per-dollar mark, the CEA said such levels should not be treated as a 'Lakshman Rekha'. According to ANI, Nageswaran indicated that what matters is whether currency movements begin to trigger loss of confidence, such as excessive hedging, reduced capital inflows, or delayed export realisations. Until such behavioural shifts emerge, he indicated, the economy remains within manageable bounds. The CEA's approach emphasizes that currency movements should be evaluated based on their impact on economic confidence rather than arbitrary numerical targets.
As reported by ANI, Nageswaran noted that the rupee's depreciation must also be viewed alongside India's import structure. He explained that while a weaker currency can increase the cost of essential imports like crude oil, it can also improve competitiveness and discourage non-essential imports, thereby supporting domestic production and exports. The CEA added that India's policy framework is focused on creating buffers through measures such as strengthening foreign exchange reserves and managing the current account deficit, rather than resisting every short-term movement in the currency. This approach recognizes that currency depreciation can have complex effects on India's import-dependent economy, requiring careful consideration of both costs and benefits.
According to ANI, Nageswaran noted that exchange rate flexibility is an integral part of macroeconomic stability in an interconnected global economy. The CEA suggested that 'it is not about a particular number', underscoring that the rupee's movement reflects broader global forces rather than isolated domestic vulnerabilities. This approach emphasizes that currency fluctuations should be viewed as natural adjustments rather than rigid thresholds that require immediate intervention. The CEA's philosophy reflects India's position in the global economy, where currency movements are seen as part of the natural ebb and flow of international trade and investment flows.
