Rupee slide not a concern for economy, says CEA Nageswaran

Chief Economic Advisor V Anantha Nageswaran said the government is unconcerned about the rupee’s fall, noting it has not affected inflation or exports. Analysts say the currency may stabilise once the India-US trade deal is finalised

New Delhi: Chief Economic Advisor V Anantha Nageswaran on Wednesday allayed fears over any major adverse fallout for the economy due to the depreciation of the rupee.

“The falling rupee is not affecting inflation or exports,” he told journalists on the sidelines of a CII event. In answer to a question, after the rupee sank to a record low to briefly fall below the 90 mark vis-à-vis the US dollar, Nageswaran quipped: “The government is not losing sleep over the weakening of Indian currency.”

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However, he also said that the rupee should improve next year. The rupee has depreciated about 5 per cent against the US dollar in 2025 in the wake of global economic uncertainties triggered by the US tariff hike on India’s exports. The RBI has been intervening to prop the rupee against excessive volatility by selling US dollars in the market, but this cannot be done beyond a point due to the forex constraints.

The rupee’s decline was driven by weak foreign flows, large offshore positioning, and uncertainty around a US-India trade deal. Analysts said that the market mood remained tense as traders watched for signs of stability in the rupee and clarity on trade negotiations between India and the United States.

“The rupee depreciation will halt and even reverse when the India-US trade deal materialises. This is likely this month. A lot, however, will depend on the details of the tariffs to be imposed on India as part of the deal,” an analyst stated.

The Indian stock market opened on a quiet note on Wednesday, with both benchmark indices showing minimal movement in early trade.

“A real concern now, which has contributed to the slow drifting down of the market, is the continued depreciation in the rupee and fears of further depreciation since the RBI is not intervening to support the rupee,” an analyst stated.

This concern is forcing the FIIs to sell despite the improving fundamentals of rising corporate earnings and a strong rebound in GDP growth, analysts added.

Some analysts are of the view that the rupee is likely to bounce back if India and the US reach an agreement on a bilateral trade deal. “There is this belief that the rupee’s fall is likely to halt and even reverse in case there is some concrete positive news on the India-US trade deal,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.