India's Chief Economic Advisor Nageswaran Remains Calm Amidst Rupee Weakening
New Delhi – India's Chief Economic Advisor (CEA), V. Anantha Nageswaran, has stated that he is "not losing sleep" over the recent weakening of the rupee against the US dollar. This statement comes as the rupee breached the 90 level against the greenback, hitting a new low of 90.30 in intraday trading on Wednesday.
Nageswaran made these remarks on the sidelines of a CII (Confederation of Indian Industry) event, emphasizing that the rupee's depreciation is not significantly impacting either inflation or exports. He expressed optimism that the situation should improve in the coming year. The rupee has depreciated approximately 5% against the US dollar in 2025.
Several factors have contributed to the rupee's recent decline. These include sustained buying of dollars by banks, and foreign institutional investor (FII) outflows. A decline in domestic equity markets has further intensified the pressure on the local unit.
While a weaker rupee can make exports more competitive by making them relatively less expensive for foreign buyers, Nageswaran has cautioned against relying on a weak currency as a long-term strategy. He advised India Inc. to not seek the "protective cover of a weak currency". Instead, he emphasized the importance of productivity, investment in research and development, and quality improvements for sustained export growth. Nageswaran noted that countries like Switzerland, Germany, and Japan achieved export success through competition, innovation and quality, rather than relying on a weak currency.
Nageswaran has in the past noted that a weaker rupee is not necessarily undesirable, especially when oil and commodity prices are low. In such a scenario, the increased cost of imports due to a weaker rupee is offset by lower commodity prices. He also stated that India's current account deficit remains manageable.
The Chief Economic Advisor has previously advised Indian companies to focus on enhancing competitiveness and productivity rather than expecting the rupee to weaken continuously. He pointed out that relying on a weak exchange rate can mask underlying inefficiencies and hinder true competitiveness.
Nageswaran observed that the world has entered an era of de-globalization, suggesting that India cannot solely rely on global GDP growth and export growth to drive its own export performance. He stressed the need for companies to invest in human capital and for industrial transition to achieve high economic growth.
