Industry Odisha Bureau, Sep 24: The Indian rupee has lost 13.1% over roughly 18 months despite strong growth. RBI deputy governor Poonam Gupta sees room for it to stabilise. Capital flows and external balances will decide.
India’s economy is expanding quickly, but its currency has told a weaker story. RBI deputy governor Poonam Gupta believes that gap may not last.
Speaking at a State Bank of India event in Mumbai, she addressed the rupee outlook. She argued the rupee was not fully reflecting India’s underlying economic strength. Recent depreciation, in her view, could prove a “temporary phenomenon”.
Economic Strength Meets Rupee Depreciation
The numbers explain her concern. The rupee fell 13.1% between March 31, 2025 and September 16, 2026. Over the same stretch, the economy was positioned to grow 7-8% in real terms.
India grew 7.8% in FY26. It is estimated to have held that pace in the first quarter of FY27.
The currency closed at 95.74 per dollar on Wednesday. In late May, it had touched a record low of 96.96. RBI and government measures to attract inflows later helped steady it.
Can the Rupee Stabilise and Appreciate?
Gupta sees scope for the rupee to stabilise. She also suggested it could appreciate from current levels. She gave no timeline for any appreciation.
Her view is an assessment, not a formal RBI target. Higher growth, by itself, does not guarantee a stronger currency.
Capital Flows Hold the Key
Much depends on the capital account. In recent years, its surplus fell short of the current account deficit. Gupta expects conditions to turn more favourable later this financial year.
She cited rising foreign direct investment as one support. Healthy corporate and bank balance sheets could also help, she said. So could recent measures to attract foreign capital. None of these guarantees stronger inflows.
External Accounts Still Carry Pressure
India’s current account deficit remains below 1% of GDP. Services exports and remittances help keep it manageable. Higher oil and gold prices, however, have temporarily widened the gap. A small deficit alone does not ensure currency strength.
Balance-of-Payments Deficits Show the Constraint
The wider balance of payments tells the sharper story. It recorded a $5 billion deficit in 2024-25. The shortfall rose to $23.6 billion in 2025-26.
These figures measure the overall balance, not the current account alone. They reflect capital inflows failing to cover the current account gap. Gupta expects these pressures to ease.
RBI Sees Capacity to Manage Volatility
Gupta said the RBI has sufficient resources to keep forex conditions orderly. That does not imply a fixed exchange-rate floor. It signals capacity to manage volatility, not a promised level.
Global Capital Finds Other Attractions
Gupta also flagged a disconnect between India’s real economy and parts of financial markets. Equity markets, she noted, have not matched the economy’s optimism. Global investors found more attractive AI-led opportunities in other economies. That drew capital and attention away from India.
She linked this largely to short-term return considerations. As global shocks ease and valuations become competitive, that could change, she said.
The path to a steadier rupee runs through the external accounts. Capital flows must improve and commodity pressures must ease. The balance of payments must also strengthen. Until then, stabilisation remains a possibility, and appreciation an untimed hope.
