Rupee Under Pressure: Time for RBI to Act

The Reserve Bank of India (RBI) needs to ease its strict control over the Indian rupee. Unlike other currencies that are more flexible, the rupee stays closely pegged to the US dollar. This rigid control has led to a significant drop in the rupee’s value.

The strength of the US dollar, driven by the strong US economy and Federal Reserve policies, has worsened the rupee’s decline. The RBI’s active use of forex reserves to manage the rupee has created a liquidity deficit in the domestic market.

Economists believe that allowing more currency flexibility could boost India’s exports by making them more competitive. It would also reduce pressure on the RBI’s forex reserves. They suggest the RBI should rethink its strategy to better align with global economic conditions and reduce market intervention.