Rupee will recover as uncertainty eases, don't panic at Rs 100 per dollar: Arvind Panagariya
New Delhi, May 25
Economist and former NITI Aayog Vice-Chairman Arvind Panagariya has said there is no need to panic if the rupee touches the Rs 100-per-dollar mark, asserting that the Indian currency could recover over time once global uncertainty eases.
Speaking to NDTV Profit, Panagariya said the Reserve Bank of India (RBI) should allow the exchange rate to adjust naturally instead of excessively intervening in the currency market to defend a psychological level.
"Don't panic at Rs 100 per dollar," he said. The exchange rate should be allowed to do its job in absorbing external shocks during periods of heightened global uncertainty and geopolitical tensions, according to him.
However, Panagariya cautioned that aggressively defending the rupee could eventually drain India's foreign exchange reserves.
According to him, whether the current global crisis proves temporary or prolonged, allowing gradual depreciation in the currency would help the economy adjust more efficiently.
In addition, the economist argued that higher global crude oil prices should gradually reflect in domestic fuel prices rather than being artificially suppressed.
"The government is not there to guarantee a fixed price of any product," he said.
Panagariya further expressed reservations over proposals aimed at attracting foreign currency inflows through high-interest NRI deposit schemes, warning that such measures could impose significant long-term costs on the economy.
Moreover, he supported Prime Minister Narendra Modi's appeal encouraging citizens to reduce discretionary foreign exchange spending but cautioned against imposing mandatory restrictions, saying such curbs could prove counterproductive.
Additionally, earlier this month, Panagariya had reiterated on social media that policymakers should not allow the psychological Rs 100-per-dollar level to dictate monetary strategy, arguing that market-driven currency adjustments are more sustainable during volatile global conditions.
— IANS
Reader Comments
Easy for an economist to say "don't panic" while common people like us are seeing LPG cylinder prices go up and petrol/diesel already touching the sky. ₹100 per dollar means my imported mobile phone will cost more, my son's education loan in dollars gets more expensive, and even chai and samosa prices will rise because of global commodity rates. 😠
As an NRI living in the US, this is interesting. When the rupee weakens, my remittances in dollars buy more back home, which helps my parents. But I see the pain for Indian students and businesses importing goods. Panagariya's point about NRI deposit schemes being costly in the long run is smart - we've seen how that backfired in the past with high-cost FCNR deposits.
While I agree with not panicking at ₹100/$ mark, I'm worried about the RBI just letting it fall without any intervention at all. The Chinese yuan is actively managed - why should we be different? A gradual, managed depreciation is fine, but if we completely let go, speculators will have a field day. Also, completely agree on not suppressing fuel prices artificially - that just leads to more subsidy burden on taxpayers.
Panagariya sahab, with due respect, you're sitting in comfort while we feel the pinch. My small business imports raw materials from China (USD-denominated) and exports finished goods. The exchange rate volatility is killing my margins. But yes, I agree that forced restrictions on forex spending would be stupid - we're not North Korea. Let the market work, but please ensure the RBI provides some forward guidance so businesses can plan. 😤
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