Data dive: Should RBI let the rupee fall?
The depreciation of the rupee has always been a political hot potato even though it is a natural trend for an emerging market. Several experts including the former chief economic advisor Arvind Subramanian have questioned the RBI’s intervention, while many economists have argued for a weaker rupee to boost trade competitiveness. However, the flip side is that a weaker rupee could induce inflationary pressures and a sharp fall could worsen India’s fiscal and current account deficits. “The rupee’s performance is much better than that of other currencies, but the RBI is taking the initiative of letting the rupee depreciate at a gradual pace with each passing day," said Radhika Piplani, chief economist at DAM Capital, who believes the rupee is overvalued to some extent. “If the yuan weakens significantly, the RBI does not have a lot of options but to let the rupee decline as well," said Dhiraj Nim, forex analyst at ANZ.
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