Economist Arvind Panagariya reassured that hitting the Rs 100 per dollar mark should not cause alarm, suggesting that the Indian rupee could bounce back once global uncertainties ease. Panagariya advised against excessive intervention by the Reserve Bank of India in the currency market to defend a psychological level, emphasizing the importance of allowing natural exchange rate adjustments.
He emphasized the need to let the exchange rate absorb external shocks during times of global uncertainty and geopolitical tensions, advocating for a hands-off approach. Panagariya warned that overly aggressive defense of the rupee could deplete India’s foreign exchange reserves, urging for a gradual depreciation strategy to enhance economic adaptability.
Panagariya also highlighted the significance of aligning domestic fuel prices with global crude oil rates rather than artificially suppressing them. He stressed that the government should not guarantee fixed prices for any product, emphasizing market-driven mechanisms. Furthermore, he raised concerns about the potential long-term costs of high-interest NRI deposit schemes for attracting foreign currency inflows.
Supporting Prime Minister Narendra Modi’s call to reduce discretionary foreign exchange spending, Panagariya cautioned against mandatory restrictions, citing potential counterproductive effects. He reiterated the importance of not letting the psychological Rs 100-per-dollar level dictate monetary policy, advocating for market-driven currency adjustments in volatile global scenarios.
