Economist and former NITI Aayog Vice-Chairman Arvind Panagariya has said that the rupee will recover in the future once uncertinty reduces. Speaking to NDTV Profit, Panagariya said the RBI continues to intervene regularly in currency markets to stabilise the rupee amid ongoing global uncertainty and geopolitical tensions.
“Defending INR may exhaust India’s forex reserves,” he warned, while adding that the rupee could recover over time once broader uncertainty eases. Panagariya argued that whether the crisis proves temporary or prolonged, allowing the exchange rate to weaken would help absorb external shocks more efficiently.
“The appropriate thing is to let the exchange rate do its job,” he said.
Panagariya also pushed back against expectations that governments can indefinitely shield consumers from rising prices. He further expressed caution over proposals aimed at attracting foreign currency inflows through high-interest NRI deposit schemes, saying such measures come with significant long-term costs.
Panagariya also argued that higher global crude prices should gradually pass through to domestic fuel prices rather than being artificially suppressed. “The government is not there to guarantee a fixed price of any product,” he said.
He added that while Prime Minister Narendra Modi was right to use “moral suasion” to encourage Indians to reduce discretionary foreign exchange spending, mandatory restrictions would be counterproductive.
Just a few days ago, Panagraiya had 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/$,” he said on X. He argued RBI should allow depreciation instead of burning forex reserves defending a psychological level.
ALSO READ: Don’t Panic At 100/$: Arvind Panagariya Urges RBI To Let Rupee Depreciate
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