The rupee's underperformance is attributed to investor reluctance to commit funds to India, despite good growth and contained inflation. The Economic Survey suggests it's 'punching below its weight'.
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Economic Survey Flags Rupee Undervaluation Even As Growth, Inflation Stay Supportive
The rupee hit an all-time low of 92.00 against the American currency in early trade on Thursday, weighed down by steady dollar demand and a cautious global mood.
The Survey further said India is a country of 145 crore people aspiring to become a richer country within a generation, within a democratic framework.
Source : Freepik
- Economic Survey: Rupee's value doesn't reflect India's strong fundamentals.
- Investor reluctance to invest in India needs examination now.
- India relies on foreign capital for balance of payments.
The value of the rupee, which has slipped to the 92 per dollar mark, does not accurately reflect India's stellar economic fundamentals, the Economic Survey said on Thursday.
"In other words, the rupee, therefore, is punching below its weight," it said, adding investor reluctance to commit funds to India warrants examination at a time when inflation is under control and growth outlook is favourable.
India depends on foreign capital flows to maintain a healthy balance of payments.
"The Indian rupee underperformed in 2025. India runs a trade deficit in goods. Its net trade surplus in services and remittances is not enough to offset it... When they run drier, rupee stability becomes a casualty," said the pre-Budget document tabled in Parliament by Finance Minister Nirmala Sitharaman.
The rupee hit an all-time low of 92.00 against the American currency in early trade on Thursday, weighed down by steady dollar demand and a cautious global mood.
On Wednesday, the rupee settled 31 paise down, revisiting its lowest-ever closing level of 91.99 against the greenback. On January 23, the rupee hit an all-time intraday low of 92 against the US dollar.
The Survey observed that the growth is good; outlook remains favourable; inflation is contained; rainfall and agricultural prospects are supportive; external liabilities are low; banks are healthy; liquidity conditions are comfortable; credit growth is respectable; corporate balance sheets are strong; and the overall flow of funds to the commercial sector is robust.
"Policy dynamism and purposeful governance reinforce this backdrop," said the document authored by a team led by CEA V Anantha Nageswaran.
The rupee's valuation does not accurately reflect India's stellar economic fundamentals, it said.
"Of course, it does not hurt to have an undervalued rupee in these times, as it offsets to some extent the impact of higher American tariffs on Indian goods, and there is no threat of higher inflation from higher-priced crude oil imports now.
"However, it does cause investors to pause," the survey said.
It has cited Australia-based Lowy Institute's Power Gap Index, which suggests that India is operating below its full strategic potential. India's power gap score is – 4.0, the lowest in Asia, excluding Russia and North Korea. India has its work cut out.
The Survey further said India is a country of 145 crore people aspiring to become a richer country within a generation, within a democratic framework. India's size and democracy preclude the possibility of templates to emulate.
"With the global dominant power rethinking its economic and other commitments and priorities, throwing global trade into a welter of uncertainty and global frictions mounting and faultlines widening, India's economic ambitions are confronting powerful global headwinds," it said.
Those same forces can be turned into tailwinds if the State, the private sector, and households are willing to align, adapt, and commit to the scale of effort that the moment demands. The task will be neither simple nor comfortable -- but it is unavoidable, the 687-page document said.
(Disclaimer: This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)
Frequently Asked Questions
Why is the Indian rupee underperforming despite strong economic fundamentals?
What factors contribute to the rupee's depreciation?
India's trade deficit in goods, where services surplus and remittances are insufficient to offset it, contributes to rupee instability. Dollar demand and a cautious global mood also weigh on the currency.
Does an undervalued rupee have any benefits for India?
An undervalued rupee can offset the impact of higher American tariffs on Indian goods. It also prevents higher inflation from increased crude oil import costs.
What is the 'Power Gap Index' and what does it suggest about India?
The Lowy Institute's Power Gap Index suggests India is operating below its full strategic potential. India's score is the lowest in Asia, excluding Russia and North Korea.
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