Correcting Rupee Against Fundamentals Ultimately Futile, Says Subbarao
· Business · Economic Times
Former Reserve Bank of India governor D Subbarao stated in Dubai that attempting to artificially correct the rupee through costly short-term measures is ultimately futile. He noted that the central bank should allow the currency to find its level while managing the trajectory rather than controlling it at a specific target. His remarks follow a recent 2% recovery in the rupee from near-record lows of 96-97 per dollar after the central bank introduced a package of macroprudential measures. Subbarao added that capital outflows remain a structural cause of depreciation, driven by international investor complaints over unpredictable tax regulations. He also dismissed the perception that the currency's decline is driven solely by current account pressures from oil prices.
Why it matters
The assessment highlights the limits of central bank interventions in defending currency values and underscores the structural need for predictable tax regulations to attract durable foreign capital into India.
Read the original report — Economic Times
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