RBI Deputy Governor Sees Scope for Rupee to Stabilise and Strengthen

The Indian rupee has room to stabilise and potentially appreciate from its current levels, despite having depreciated significantly since March 2025, according to RBI Deputy Governor Poonam Gupta.

The rupee has cumulatively depreciated 13.1 per cent on a point-to-point basis between March 31, 2025 and September 16, 2026, Gupta said while speaking at an SBI conclave in Mumbai.

“If anything, there seems to be a fair case for the rupee to not just stabilise but perhaps even appreciate from the current levels,” she said, referring to expectations that had emerged among market analysts when capital flow measures were initially announced.

Gupta said India’s current account deficit (CAD) is expected to narrow further in the coming years, supported by the country’s traditional strengths as well as emerging areas of strength, including improving merchandise exports.

She said the Reserve Bank of India remains committed to maintaining orderly conditions in the foreign exchange market and has sufficient resources to manage external financing requirements.

“With the RBI remaining committed to ensuring orderly conditions in the foreign exchange market and having the wherewithal to meet decades worth of CAD, or the net balance of payment (BOP) deficit, the current market dynamics do not appear especially well-founded,” Gupta said.

India has traditionally recorded a relatively small current account deficit alongside a larger capital account surplus, resulting in a net positive balance of payments. The CAD-to-GDP ratio has also declined over time, strengthening the resilience of the country’s external position.

Gupta highlighted net services exports and remittances as key structural strengths for India’s external sector. Together, they are sufficiently large and resilient to offset the merchandise trade deficit and keep the CAD below 1 per cent of GDP.

However, recent increases in oil and gold prices have temporarily pushed the CAD higher. At the same time, the capital account surplus has fallen short of the CAD over the past two years, resulting in a negative balance of payments of about $5 billion in 2024-25 and $23.6 billion in 2025-26.

Gupta also pointed to a potential decline in India’s dependence on imported crude oil, driven by the expansion of alternative energy sources and efforts to increase domestic oil production.

She said lower oil demand relative to GDP, along with the possibility of oil prices stabilising once geopolitical conflicts ease, could provide additional support to India’s external position.

Meanwhile, India’s broader trade basket is responding positively to emerging trade opportunities, she said, adding that the benefits of recently signed free trade agreements could strengthen exports further.

A conducive exchange rate, she added, could also support the positive trend in India’s trade and external sector.