Speaking against the backdrop of the rupee nearing the psychologically significant 100-per-dollar mark amid geopolitical tensions in West Asia, Malhotra said, “With the recent depreciation, it would be reasonable to think that rupee is not overvalued. If anything, one could argue that rupee has become undervalued, both in nominal as well as in REER terms.”
REER, or real effective exchange rate, measures a currency’s value against a basket of trading partner currencies after adjusting for inflation.
The RBI governor reiterated that the central bank does not target any specific exchange-rate level and intervenes in the foreign exchange market only to curb excessive volatility or speculative movements.Malhotra also sought to ease concerns over India’s external sector position despite higher crude oil prices linked to the ongoing West Asia conflict.
According to Mint, he said the balance of payments (BoP) situation was “not an undue concern yet”, though it requires attention from the government, RBI and other institutions.
“I’m quite optimistic about having a manageable BoP, going forward,” he told the publication, while stressing the need for long-term measures to improve exports, competitiveness and reduce import dependence.
The rupee has remained under pressure in recent weeks due to elevated oil prices, foreign fund outflows and global market volatility. Reuters reported last week that the RBI had stepped up interventions to stabilise the currency as it touched record lows
