RBI governor Sanjay Malhotra thinks rupee might be undervalued
What's the story
Reserve Bank of India (RBI) Governor Sanjay Malhotra has said that the Indian rupee is not overvalued and could even be undervalued after its recent depreciation against the US dollar. The statement comes as the currency nears the psychologically-important 100-per-dollar mark amid a war in West Asia. Malhotra said this during an interview with Mint.
Intervention policy
No specific exchange-rate level target
Malhotra reiterated that the RBI does not target any specific exchange-rate level. He clarified that the central bank would only intervene to curb abnormal and high volatility or undue speculation in the currency market. This clarification comes as a response to concerns over India's external position amid rising crude prices due to the West Asia conflict.
BoP situation
BoP situation not undue concern yet
Despite the West Asia conflict's impact on crude prices, Malhotra said that India's balance of payments (BoP) situation is "not an undue concern yet." He stressed the need for concerted efforts by the government, RBI, and other institutions to address this issue. The governor also emphasized long-term measures to improve competitiveness and exports, reduce import dependence, and attract capital.
Economic forecast
Impact of higher crude prices on India's debt
Malhotra acknowledged that higher crude prices would impact India's debt but assured that capital flows are likely to remain strong. He said, "On the current account side, there would be pressure due to elevated crude prices." However, he added that services exports are expected to remain resilient, while the war's impact on remittances would be minimal.
Investment outlook
Resilience in capital flows
Malhotra also highlighted the resilience in capital flows, saying gross foreign direct investments (FDI) hit a record high of $94.5 billion in 2025-26, up by 17%. He said this is an indication of India's attractiveness as an investment destination. However, for BoP purposes, net FDI is more relevant than gross numbers due to higher repatriations.