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Informist, Wednesday, Feb. 18, 2026

 

By Pratiksha and Aaryan Khanna

 

MUMBAI – Foreign exchange market veteran Jamal Mecklai wants the Reserve Bank of India to engineer volatility in the exchange rate of the rupee to keep speculators betting against the rupee on their toes. The predictability of the domestic currency being in a linear falling trajectory may have a worse macro-economic impact down the line and this makes two-way movement a necessity.

 

"The key is to keep breaking people's mind set. If people come to believe that you (RBI) will allow rupee to keep falling, one day it will create chaos. So, it is not in your (RBI's) interest to do that," the managing director of Mecklai Financial Services Ltd. told Informist.

 

Ever since Sanjay Malhotra took over as the RBI governor in December 2024, the rupee has witnessed highly volatile moves, not only cumulatively but on a day-to-day basis as well. In 2025, the rupee depreciated over 5% against the dollar. The current exchange rate management strategy is in sharp contrast to the playbook employed under Malhotra's predecessor Shaktikanta Das in the last two years of his tenure, which ensured that the Indian currency stayed rock steady come what may.

 

Speaking about the RBI's management of the exchange rate under Malhotra's leadership, he said, "It is great. He rocked it (the rupee). When people start pulling out money there is no point fighting that. Intraday volatility is so high since he came in."

 

In 2025, the Indian currency's average daily range was 27 paise, as against just 9 paise in 2024. In fact, volatility of the Indian unit picked up the very month Malhotra joined. In December 2024, the rupee traded in a range of INR 1.24, compared to just 44 paise in November. Foreign portfolio investors pulled out a net $11 billion from Indian markets in 2025, with debt seeing inflows but the equity market facing record net outflows of nearly $19 billion.

 

With the trade deal between India and the US done, the veteran said the key to a sustained appreciation of the rupee and to attracting higher inflows would be more domestic development. Foreigners would follow domestic private investment in India as this is backed by a favourable outlook on domestic demand that has not been seen for several years, Mecklai said.

 

"There is still no investment coming in. Some has come but you really need that investment, people need to buy it, and as it comes in you will see the rupee strengthen," Mecklai said. "And ultimately, the key is domestic investment. I think that would be the big difference."

 

On Feb. 2, India and the US announced a trade deal under which tariff on Indian goods exports to the US were lowered to 18% from 50%. Following this announcement, the rupee logged its best day in over seven years on Feb. 3. Since then, it has largely swung in a narrow band without threatening to top the intraday high of 90.04 against the dollar that it clocked the day after the US trade deal was announced.

 

So far in February, foreign portfolio investors have invested $2.35 billion in Indian markets on a net basis. This is after pulling out a net $2.41 billion last month. The rupee settled at 90.6675 a dollar Wednesday after ending January at 91.9825 per dollar, up sharply from its life-time low of 91.9950.

 

Mecklai said the lack of private investment stung the rupee especially in 2025, apart from US tariffs and foreign investment outflows. Private sector capital investment has not picked up in India even as the government has said there are some green shoots in some areas.

 

The Economic Survey for FY26 said private investment activity is reviving as evident from corporate announcements. The Survey cited CMIE data, which shows private corporate investment announcements at INR 14.6 trillion in Apr-Sept, much higher than INR 7.9 trillion in the year-ago period and the previous decadal peak of INR 11.4 trillion in Apr-Sept FY24.

 

"I mean that's (private investment) the trigger for everything. Now again, why there is lack of investment by the private sector? Partly because they don't see the demand and why do they not see the demand? Because the government does not give them (companies) sops," he said.

 

Talking about the progress on the internationalisation of the Indian rupee, Mecklai said there has been some work on that front by the government and the central bank, but it is not major yet. "There is some movement little bit, little bit. Ultimately, the action is capital account," he said. "We need to continue to keep that game going but it is not a major play in the immediate term basically."

 

In July 2022, the RBI had announced measures to increase the use of the rupee for foreign trade, allowing exports and imports between India and all its trading partners to be invoiced and settled in rupee denomination and exchange rate, provided the other country agrees to it too.  End

 

Edited by Ashish Shirke

 

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