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India Should Not Deplete Reserves to Defend Rupee, Says Raghuram Rajan
Sentiment: NeutralHigh Priority
What Happened?
Raghuram Rajan, former RBI governor, advises against depleting foreign reserves to defend the rupee, which has lost 6% of its value in 2026. He emphasizes a long-term view on currency stability.
Key points
- The rupee has depreciated by about 6% in 2026, making it the second-worst performing currency in Asia.
- Rajan warns that high oil prices and foreign equity outflows may worsen India's current account deficit.
- He suggests that some currency depreciation can enhance export competitiveness.
- India has used about half of the $140 billion secured to support the rupee.
- Rajan cautions against quickly spending reserves to defend a specific currency level.
Key insights
- Rajan's perspective may lead to a more cautious approach in currency interventions.
- If oil prices remain high, India could face increased economic pressures.
- The reliance on foreign reserves for currency defense may prompt a reevaluation of fiscal strategies.
Why it matters
This advice could influence India's approach to currency management and financial stability.
Tags
Entities
Raghuram Rajan· PersonReserve Bank of India· OrganizationIndia· Country
Source
Business Standard
