Archive · 17 Sep 2025
RBI Exchange Rate Policy: Calls for a New Intervention Approach
Imagine the rupee is like a car, and the RBI is the driver.
The author thinks the driver (RBI) is always trying to make the car (rupee) weaker to help exports, which is good sometimes.
But the author believes that the driver (RBI) should also consider the rest of the economy and make the car (rupee) stronger at times.
The writer thinks that since the rupee has become the worst performing currency, despite global dollar weakness, the RBI could enhance inflation control by not pushing the rupee weaker when global growth is weak and uncertain.
The RBI should use a new tool considering global growth and domestic competitiveness to determine the right exchange rate policy.
The author critiques the RBI's exchange rate policy, particularly its focus on keeping the rupee weak.
The rupee has performed poorly compared to other currencies since January, despite dollar weakness.
Weakening the rupee has not significantly boosted exports and has impacted inflation.
The author suggests a more nuanced approach to exchange rate policy, considering global growth forecasts.
The author believes the RBI needs to be more data driven and less reactive
- Who
- The writer (CEO of Mecklai Financial) and the Reserve Bank of India (RBI)
- What
- The writer's viewpoint on the RBI's exchange rate policy and its potential impact on the Indian economy, particularly regarding the rupee's value and its relationship to exports and inflation.
- When
- Since January 20, when 'the Big T' entered the scene
- Where
- India
- Why
- The RBI should adopt a smarter approach to exchange rate policy by considering global growth forecasts and domestic competitiveness, rather than solely focusing on keeping the rupee weak to boost exports.
RBI's Current Approach
Author's Proposal
Exchange Rate Policy
RBI's Current Approach
Focusing on maintaining a weaker rupee to support exporters.
Author's Proposal
Adopting a more flexible approach to exchange rates, considering global growth forecasts and domestic competitiveness.
- Rupee Performance (Since Jan)
- Worst performer out of 25 tracked currencies
- DXY (Dollar Index) Change (Since Jan)
- Fell by 8.8%
- Indian Goods Exports (12-month avg.)
- Grew by 0.2% year-on-year
- Indian Goods Imports (12-month avg.)
- Grew by 4% year-on-year
- Deficit (Previous year)
- 4.8%