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Informist, Thursday, Jan. 29, 2026

 

--EconSurvey: Rupee depreciation could pave way for imported inflation 

--EconSurvey: Does not hurt to have undervalued rupee amid US tariffs 

--EconSurvey: Rupee valuation not accurately showing India econ fundamentals 

--EconSurvey: Robust, stable currency only possible via export competitiveness 

 

NEW DELHI – The rupee's present valuation does not accurately reflect India's economic fundamentals, the Economic Survey for 2025-26 (Apr-Mar) said Thursday. However, it does not hurt to have an undervalued rupee, as it somewhat neutralises the impact of US tariffs on Indian exports, it said. 

 

"In other words, the rupee, therefore, is punching below its weight," the Survey, authored by a team led by Chief Economic Adviser V. Anantha Nageswaran, said. "Of course, it does not hurt to have an undervalued rupee in these times, as it offsets to some extent the impact of higher American tariffs on Indian goods, and there is no threat of higher inflation from higher-priced crude oil imports now." 

 

The rupee has depreciated over 2% against the dollar so far this year, after falling almost 5% last year, owing to a prolonged delay in clinching a trade deal between India and the US, as the latter slapped hefty 50% tariffs on the former. The rupee's real effective exchange rate index fell to a near 12-year low of 95.30 in December, indicating the Indian currency is undervalued by nearly 5%.

 

The Survey said that India and the US are expected to conclude the ongoing negotiations for the much-touted bilateral trade agreement during the year. To be sure, it did not specify what "during the year" denotes – FY26, 2026, or FY27.

 

However, the Survey flagged that an undervalued rupee does cause investors to pause, saying "investor reluctance to commit to India warrants examination." In 2025, foreign portfolio investors withdrew $10.68 billion worth of funds from domestic market, on a net basis, the most in three years. The streak has continued this year as well, with net FPI outflow worth $3.3 billion from domestic markets seen so far. The depreciation of the Indian currency could also pave the way for imported inflation, it said. 

 

The Survey said that a robust and stable currency can only be achieved through export competitiveness. "History demonstrates that countries with sustained manufacturing export success are those that have maintained hard currency status, characterised by currency stability and strength," it said.

 

Over the medium to long term, the Survey expects the exchange rate dynamics to be guided by structural fundamentals, such as productivity gains, export diversification towards higher-value goods and services, deeper integration into global value chains, and a stable policy environment rather than short-term fluctuations.  End

 

US$1 = INR 91.96

 

Reported by Pratiksha

Edited by Tanima Banerjee

 

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