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Manufacturing Boost Key to Rupee Stability, Says CEA Nageswaran

Chief Economic Adviser V Anantha Nageswaran stated that building manufacturing capacity is crucial for achieving long-term stability in the rupee's value. He explained that a strong manufacturing-led export base improves the current account, builds foreign reserves, and establishes currency credibility. While acknowledging the rupee recently hit an all-time low, he noted its depreciation is comparable to other emerging market currencies and not an India-specific issue. He highlighted India's significantly strengthened external buffers, with forex reserves doubling over the past decade to over USD 700 billion.

Key Points: CEA: Manufacturing Strength Essential for Currency Stability

  • Manufacturing drives export growth
  • Export growth improves current account
  • Strong reserves cushion external shocks
  • Rupee volatility is an EM-wide trend
2 min read

Strengthening manufacturing capacity essential for achieving long-term currency stability: CEA Nageswaran

CEA V Anantha Nageswaran links robust manufacturing exports to long-term rupee stability, highlighting India's improved external buffers.

"Strengthening manufacturing capacity is essential for achieving long-term currency stability. - V Anantha Nageswaran"

New Delhi, January 29

Strengthening manufacturing capacity is essential for achieving long-term currency stability, as export-led industrial growth underpins stronger external balances and exchange-rate credibility, said the Chief Economic Adviser V Anantha Nageswaran on Thursday.

CEA noted that currency strength ultimately depends on a country's industrial and manufacturing capacity.

Across successful industrialisers, periods of strong manufacturing-led export growth have historically preceded improvements in current account balances, reserve accumulation, and exchange-rate credibility.

Services exports, while important, play a secondary and complementary role and cannot fully substitute for a strong manufacturing base, the CEA noted.

During the presentation on the Economic Survey, CEA outlined a clear pathway to currency strength: robust growth in manufacturing exports leads to improved current account positions, which in turn support the build-up of foreign exchange reserves and enable a gradual strengthening of currency credibility over time.

Addressing concerns about currency movements, CEA Nageswaran noted that currency depreciation is a broad, emerging-market (EM) phenomenon rather than an India-specific issue.

Data tracking EM currencies since 2000 show that the Indian rupee's depreciation has been broadly comparable to peers such as the Brazilian real, South African rand, and Indonesian rupiah.

Since 2020, EM currencies have experienced heightened volatility amid global monetary tightening and geopolitical shocks. The rupee's movement during this period has remained relatively stable compared to several peer currencies, underscoring India's external sector resilience, he highlighted.

Notably, on Thursday, Indian rupee hit an all-time low against the US Dollar declining to 91.99, eclipsing its previous all-time low of 91.96 hit last week.

In his presentation, CEA also mentioned that India's external sector has become significantly more resilient, with stronger buffers and improved stability indicators.

Foreign exchange reserves have nearly doubled over the past decade, rising from USD 341.6 billion in FY15 to USD 701.4 billion as of January 16, FY26, providing a strong cushion against external shocks.

This improvement has enhanced the country's ability to manage volatility in global financial markets, CEA Nageswaran said.

India's import cover improved from 8.9 months in FY15 to over 11 months in FY26 (as of January 16), reflecting greater external payment capacity, he highlighted in the presentation.

- ANI

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Reader Comments

S
Sarah B
The data on forex reserves doubling is impressive and reassuring. It shows the RBI has built a strong safety net. Even if the rupee hits new lows occasionally, we have the buffers to manage it without a crisis. Good long-term thinking.
P
Priya S
Agree with the analysis, but the proof will be in the implementation. We need to make it easier for manufacturers with stable policies, less red tape, and better infrastructure. Otherwise, this remains a theory. Hoping for action on the ground.
V
Vikram M
It's a bit disheartening to see the rupee at 92, but the CEA is right—it's a global trend, not just us. The comparison with Brazil and Indonesia puts things in perspective. Our fundamentals are stronger than before.
R
Rohit P
Manufacturing is key, but let's not forget about quality. We need to move beyond just volume and compete on the global stage with high-quality, innovative products. That's how Japan and Germany built strong currencies.
M
Michael C
As someone who follows global economics, this is a solid, textbook analysis. The pathway outlined—manufacturing exports → better current account → forex reserves → currency credibility—is historically proven. India seems to be on the right track, albeit a long one.

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