- Arvind Panagariya urges RBI to allow gradual rupee depreciation near record lows
- He warns against defending Rs 100/USD level using forex reserves, calling it futile
- Panagariya cautions reliance on dollar bonds and expensive NRI dollar deposits
Economist and former NITI Aayog Vice-Chairman Arvind Panagariya has urged the RBI to let the rupee weaken gradually instead of trying to artificially support it, as the currency neared record lows and the one-year forward market briefly crossed the 100-per-dollar mark.
In a series of posts on X, Panagariya argued that “100 is just a number” and warned policymakers against letting the psychological barrier of Rs 100/USD dictate monetary strategy.
“Don't panic at ₹100/$,” says economist Arvind Panagariya as rupee volatility deepens. He argues RBI should allow depreciation instead of burning forex reserves defending a psychological level.
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According to him, if the current oil shock proves prolonged, attempts to prop up the rupee through forex reserve intervention would only drain reserves without delivering lasting stability.
He also cautioned against relying on dollar-denominated bonds or high-interest NRI dollar deposits, calling them expensive stop-gap measures that largely benefit wealthy overseas investors.
Panagariya stressed that India's macroeconomic conditions today are far stronger than during the 2013 currency crisis, when inflation was running in double digits.
With inflation currently relatively contained, he said the economy is better positioned to absorb moderate inflationary pressure arising from a weaker rupee.
His remarks came even as the rupee staged a partial recovery on Thursday, rebounding 49 paise from its record closing low to settle at 96.37 against the US dollar.
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The recovery followed a decline in crude oil prices and signs of easing geopolitical tensions, aided by likely intervention by the RBI.
Forex analysts, however, remain cautious. The one-year forward market crossing the 100/dollar mark reflects growing expectations of further rupee weakness in the coming months.
A recent report by DBS Bank projected the dollar-rupee pair to likely remain in the 95-100 range through the rest of 2026 amid sustained external pressures and oil market volatility.
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