Rupee “undervalued relative to fundamentals”, yet no need to lose sleep: V. Anantha Nageswaran explains why

India’s Chief Economic Adviser V. Anantha Nageswaran has said the rupee remains “undervalued relative to fundamentals,” arguing that its current levels do not fully capture the strength of the country’s macroeconomic position, even as currency weakness has influenced global perceptions of India’s economy.

Speaking in recent interactions on Bloomberg Television, Nageswaran maintained that the rupee’s depreciation should be viewed in the context of a broader global dollar rally rather than domestic fragility. “The rupee is undervalued relative to fundamentals,” he said, while also downplaying concerns around its slide, adding he is “not losing my sleep over it.”

The Indian rupee has remained under pressure in recent months, trading near the 83-84 per US dollar range and hovering close to record lows. The currency has seen a gradual depreciation trend of around 2–3% annually in recent years, largely tracking the strength of the US Dollar Index, which has stayed elevated amid higher US interest rates and global uncertainty.

Despite this, India’s macroeconomic fundamentals remain strong. The economy is projected to grow at around 6.5–7% in FY26, making it one of the fastest-growing major economies globally. India’s nominal GDP stands at roughly $3.7–3.9 trillion, placing it among the world’s top economies, though its exact ranking currently around fifth or sixth has fluctuated due to exchange rate movements rather than any significant change in real output.

Nageswaran and other policymakers have pointed to India’s external strength as a key stabilising factor.

The country’s foreign exchange reserves, managed by the Reserve Bank of India, remain robust at around $630-650 billion, providing a substantial buffer against currency volatility and external shocks.

At the same time, a relatively weaker rupee offers strategic advantages. Export-oriented sectors such as IT services, pharmaceuticals, and textiles benefit from improved price competitiveness. India’s services exports have crossed $300 billion annually, with IT services accounting for nearly half of that total. Goods exports, meanwhile, remain in the $430-450 billion range.

For companies earning in dollars, rupee depreciation typically boosts margins when revenues are converted back into local currency.

The “undervalued” narrative is also being framed as a potential draw for foreign investors. India continues to attract strong foreign direct investment inflows, averaging between $70 billion and $85 billion annually in recent years. A weaker currency lowers entry costs for global investors, making Indian assets relatively more attractive, even as portfolio flows remain sensitive to global interest rate cycles.

However, there are trade-offs. India imports nearly 85% of its crude oil requirements, meaning a weaker rupee can increase import costs and add to inflationary pressures. This creates a balancing act for policymakers, particularly the central bank, as they manage growth alongside price stability.

Beyond currency commentary, Nageswaran also addressed India’s ongoing trade negotiations with the United States. He described the proposed agreement as somewhat “elusive” but expressed optimism about its conclusion within the current financial year. “I was hoping something would be done by the end of November, but it has turned out to be elusive,” he said. “That’s why it is difficult to give a timeline on this. However, I would be surprised if we don’t have it sealed by the end of the financial year.”

The remarks underscore the government’s broader stance: while the rupee may appear weak, policymakers view it as a reflection of global adjustments rather than domestic vulnerabilities, one that could support exports, attract investment, and sustain India’s growth momentum even amid external headwinds.