Key Details
At the 13th SBI Banking and Economics Conclave on 23 September 2026, Gupta linked her view on the rupee to India’s recent external balances and economic performance.
The rupee depreciated 13%, measured point to point from 31 March 2025 to 17 September 2026.
India recorded balance-of-payments deficits of about US$5 billion in 2024–25 and US$23.6 billion in 2025–26, as capital-account surpluses fell short of current-account deficits.
GDP grew 7.8% in 2025–26 and an estimated 7.8% in Q1 2026–27.
Gupta said there was a “fair case” for the rupee to stabilise and perhaps appreciate from current levels. She gave no exchange-rate target or timetable.
Why Deputy Governor Sees Scope for the Rupee to Appreciate
Higher oil and gold prices have added to India’s import bill, while capital inflows have been insufficient to cover its current-account deficits for two years. Those pressures contributed to the rupee’s decline. Gupta argued that the balance could improve on both sides: a smaller current-account deficit and a stronger capital-account surplus.
She expects services exports and remittances to remain substantial, merchandise exports to benefit from new trade opportunities, and oil-import dependence to decline relative to the economy. She also sees scope for capital inflows to strengthen as investment conditions and relative valuations change. Gupta said special capital-flow measures introduced in June 2026 had already helped the balance of payments this year.
Strong Growth Has Not Removed External Pressures
Gupta described an economy that has maintained growth despite trade disruption, energy shocks and shifts in global investment towards AI-related opportunities. She contrasted the strength of India’s bond market with weaker enthusiasm for its equities, arguing that parts of the financial market have not fully reflected the domestic growth outlook.
That distinction is central to the speech: strong GDP growth has coexisted with balance-of-payments deficits and rupee depreciation. Gupta expects the gap to narrow, while reiterating the RBI’s commitment to orderly conditions in the foreign-exchange market.
Policy Relevance
Market stability and currency direction are different questions. Gupta reaffirmed the RBI’s role in maintaining orderly foreign-exchange trading; her case for appreciation was an assessment of economic conditions, not a commitment to defend a rupee level.
The outlook has measurable tests. The case strengthens if the current-account deficit narrows and sustained capital inflows cover it. Improved GDP growth alone would not establish that the external pressure has passed.
Timing remains uncertain. The expected benefits of trade agreements, lower oil-import dependence and changing global investment preferences may arrive at different speeds. Policy and market decisions should not treat possible appreciation as an assured near-term outcome.
Relevant Question for Policy Stakeholders: Will a narrowing current-account deficit and sustained capital inflows be sufficient to reverse India’s recent balance-of-payments pressure?
Follow the Full Speech Here: The Indian Economy in an Ever More Volatile and Complex World - Special Address by Dr. Poonam Gupta