India's economic policymakers are not losing sleep over the value of the rupee, a top government adviser has stated. Sanjeev Sanyal, a member of the Prime Minister's Economic Advisory Council, emphasized a long-standing policy of allowing market forces to determine the currency's level, while the central bank steps in only to prevent wild swings.
A Policy of Managed Flexibility
Sanyal made these remarks while speaking at the prestigious 'Times Network India Economic Conclave 2025' on December 18, 2025. He outlined the evolution of India's approach to the rupee, tracing it back to the economic liberalization of the early 1990s.
Since that pivotal decade, the Indian rupee has largely been allowed to find its own equilibrium in the foreign exchange market. This marks a significant shift from a rigidly controlled regime to one of greater flexibility. The core philosophy, as explained by Sanyal, is to let fundamental economic factors guide the currency's value over the long term.
The RBI's Role as a Guardian Against Turmoil
However, this flexibility is not absolute. Sanyal clarified that the Reserve Bank of India (RBI) maintains a vigilant watch and is prepared to act when necessary. The central bank's primary tool is its substantial foreign exchange reserves.
The RBI uses these reserves to intervene in the currency market in either direction—buying or selling rupees—with a specific mandate. Its goal is not to defend a particular exchange rate but to "stop excessive volatility." This means preventing sharp, disorderly movements that could destabilize financial markets and hurt importers or exporters.
This approach allows the rupee to adjust naturally to global capital flows and trade dynamics, while the RBI acts as a shock absorber during periods of market panic or speculative frenzy.
Implications for India's Economic Stability
Sanyal's comments underscore a mature and confident stance on external sector management. By stating he is "not concerned about the rupee at all," he signals trust in the underlying strength of India's economy and the effectiveness of the RBI's framework.
The policy has several key benefits:
- It provides predictability for businesses engaged in international trade.
- It helps the economy absorb external shocks, like rising global oil prices.
- It allows the RBI to conserve its forex reserves for genuine crises rather than daily management.
This balanced strategy of managed flexibility has become a cornerstone of India's macroeconomic stability, enabling growth while safeguarding against currency-related financial instability.
