New Delhi, Sep 24 — The rupee has cumulatively depreciated by 13.1 per cent (on a point-to-point basis) from March 31, 2025 to September 16, 2026, and there is a fair case for the Indian currency to not only stabilise but also appreciate from current levels, according to Poonam Gupta, the Reserve Bank of India’s (RBI) Deputy Governor.
“If anything, there seems to be a fair case for the rupee to not just stabilise but perhaps even appreciate from the current levels, as was being anticipated by the market analysts when the capital flow measures were first announced,” she said.
She said the current account deficit (CAD) should shrink further in coming years, with the traditional strengths persisting and the new ones emerging, including the growing success in merchandise exports.
“With the RBI remaining committed to ensuring orderly conditions in the foreign exchange market and having the wherewithal to meet decades worth of CAD, or the net balance of payment (BOP) deficit, the current market dynamics do not appear especially well-founded,” Gupta said at the SBI conclave in Mumbai.
India has traditionally run a small current account deficit (CAD) and a larger capital account surplus, resulting in a net positive BOP.
Its CAD as percent of GDP has declined over time, bringing resilience to the BOP.
“Furthermore, the CAD levels have remained far below the levels generally considered to be prudent for emerging market economies. Net services exports and remittances remain its great structural strengths. Together, they are large and resilient enough to absorb the merchandise trade deficit and keep the CAD contained at below 1 percent of GDP,” Gupta elaborated.
The recent oil price and gold price shocks have pushed CAD temporarily higher. In addition, in the last two years, capital account surplus has fallen short of CAD, resulting in a negative BOP of about $5.0 billion in 2024-25 and $23.6 billion in 2025-26.
She further said that India’s dependence on imported oil is set to decline, through alternative sources of energy and the quest to find its own oil reserves, both of which will further bolster the trend reduction in the demand for oil as percent of GDP.
“This would be in addition to oil prices themselves stabilising as soon as the conflict resolves. Meanwhile, the rest of the trade basket is responding well to the new trade opportunities that are being leveraged, a strength that will continue with the positive impact of recent FTAs materialising, and a conducive exchange rate,” she mentioned.